Fed Fires Bazooka of New Unlimited Market Interventions, Gold Soars

Mish

The Fed fired an array of new market measures this morning. The Market rallied then had second thoughts.

The Fed hopes to unclog corporate and municipal debt markets with its New Bazooka of Unlimited Interventions.

The U.S. Federal Reserve on Monday rolled out an extraordinary new array of programs aimed at blunting the “severe disruptions” to the economy caused by the coronarvirus outbreak, backstopping an unprecedented range of credit for households, small businesses and major employers.

In a series of actions the Fed agreed to historical measures that would see it for the first time back the purchases of corporate bonds and direct loans to companies, expand its asset holding by as much as needed to stabilize financial markets, and roll out “soon” a program to get credit to small and medium-sized business.

Under the new programs, the Fed will lend against student loans, credit card loans, and U.S. government backed-loans to small businesses, and buy bonds of larger employers and make loans to them in what amounts to four years of bridge financing.

Bazooka Moment

It’s their bazooka moment,” said Russell Price, chief economist at Ameriprise Financial Services in Troy, Michigan. “It’s their ‘we’ll do whatever it takes’ moment which should be a sign to financial markets and investors that the Fed will provide any and all liquidity necessary to support the economy through this period.”

So What Moment

The market responded with a surge then a "so what?"

The Nasdaq is back in the green however, as if technology is going to be the big winner somehow.

Three Part Problem

  1. The problem isn't liquidity. It's solvency.
  2. People out of work don't need a loan, they need a job.
  3. Small businesses don't need a loan, they need customers.

Asset prices are still too high.

Lending against student loans doesn't do a damn thing for the students.

Bailing out failed businesses is the same mistake the Fed made in 2008. That too did nothing for consumers.

Gold Action

Gold liked the announcement, however. Gold rose $74 to $1559.

That's a massive 5% jump in one day.

Mike "Mish" Shedlock

Comments (34)
No. 1-13
Zardoz
Zardoz

Sure would be nice if there were some adults in charge.

Bam_Man
Bam_Man

Lending $Trillions more into a collapsing economy/financial system only ensures that we will be stuck with zero (or below) interest rates for good.

I just don't see how we can have a functioning economy with zero interest rates forever. Zero interest rates = zero savings = zero investment = zero productivity growth = zero increase in average living standard.

I believe we have arrived at the "end of the road" as far as our current Post-Bretton Woods financial/monetary system is concerned.

fibsurfer
fibsurfer

How about throwing money at a solution to the virus?

Maximus_Minimus
Maximus_Minimus

As can be expected in an economy built on mountain of debt.

Russell J
Russell J

I called my coin shop this morning and they wanted $7 over spot for silver eagles and he won't have them till next week. I shoulda bought last week @$3 over spot and they had them in house.

This isn't a problem bailouts can fix. The natural course of things requires failure so new opportunities can become available, however painful and inconvenient.

This is crony capitalism and it seems we are getting close to the end of this ride. Hopefully true capitalism and democracy survive on the other side of this sh#tstorm.

njbr
njbr

Coming to your city..

...They are removing respirators from patients over 65 in Spain and giving them to younger patients. Seniors are then given sedatives so they don’t suffer. We need to treat this pandemic like the biggest crisis of our lifetime because it is.....

....People lined up outside hospitals in NYC...

njbr
njbr

NYPost

....Roughly 13% of all infected New Yorkers are hospitalized, Cuomo said.

Hospitals across the state are reporting they’re quickly running out of space and supplies, such as ventilators, masks, gloves and gowns.

Cuomo said the state is sending millions of so-called N95 masks to New York City and Long Island over the next few days.

But he anticipated that those supplies won’t last long and reiterated a call for President Trump to activate the Defense Production Act.

Trump invoked the 1950 law last week, allowing him to order medical companies to ramp up production of masks and other sorely-needed supplies.

However, in a confusing turn of events, Trump has refused to activate the Korean War-era law.

On Sunday, Trump claimed he was holding off because the U.S., unlike Venezuela, is not a country “based on nationalizing our business.”

Tony Bennett
Tony Bennett

"the Fed agreed to historical measures that would see it for the first time back the purchases of corporate bonds"

Yes. Investment Grade. Really? How long will ANY corporate be able to maintain that grade in this environment?

Of course, the precedent has been set. In 2011 when S&P had the temerity to downgrade US debt, Treasury Secretary Geithner went apesh!t and threatened them. Expect unbelievable pressure on Moodys, Fitch, and S&P to maintain credit rating for any corporate bond the SPV has purchased.

crazyworld
crazyworld

People having most of their savings in physical gold now should not wary too much as the Fed apparently work in their favor..

abend237-04
abend237-04

My biggest worry now is that the beltway swamp gang, led by Pelosi, is hell-bent to use the Rahm Emanuel approach to government, thinking they are the creators and therefore proper purveyors of wealth in this country.
The only wealth we have flows from the hands of working people, millions of whom are now going home with no jobs, while Nancy holds out for college debt forgiveness and abortion funding for all, forever.
If they'd ever had to meet a Friday payroll without enough money to cover the bill, they'd know that a $1,000 check in the mail is like pissing into a hurricane. It might help a little on one Friday; A solution, it's not.
Get testing ramped, isolate positives and get people back to work. Don't wait for politicians and bureaucrats to feel safe saying we can all come out now; We'll be living in caves again.

Six000mileyear
Six000mileyear

"...in what amounts to four years of bridge financing." That's quite a tip of the hand about the severity of the financial system and economy.

dagnyg
dagnyg

The USFed's latest panic response is socialism. Markets need to clear. Price discovery is required.
I feel badly for the sick, the infected, the newly unemployed.
My biggest fear is that as the faked financialized economy since 2008 continues to spiral downwards, and as our leaders become fearful of getting sacked they start a real shooting war with some "foreign devil'.

lol
lol

The trillions they're printing everyday isn't about the economy.never about the economy,the economy collapsed over a decade agoFed know that,this is about keeping govt from complete Zimbawian type collapse


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