Panic Sets In: Fed Promotes More Free Money

Mish

Lawmakers need to do more says Minneapolis Fed President Neel Kashkari.

Free Money for 18 Months

The Fed cannot directly give money away so that burden falls on Congress. Kashkari follows Fed Chair Jerome Powell in seeking Congressional Action.

“They are going to need more. If this is a slow recovery, the way I think it is -- I think we’re in this for months, a year, 18 months -- there are going to be a lot of families that are going to need direct financial assistance,” Kashkari said Thursday during a virtual event with CBS. “I think a V–shaped recovery is off the table.”

“Putting money directly in the hands of laid-off Americans is, I think, the most direct way to get assistance, and then they will spend the money where they need it,” Kashkari said. “I just think money in the pockets of people who have lost their jobs is what we need right now until we can get the health care system to catch up and get control of this virus.”

I case you were wondering what sent the S&P in a huge 70-point S&P 500 U-Turn today, that reason is as good as any.

Powell's Message

Yesterday, Powell made similar statements, just not as forceful. 

Recall that the Fed has lending powers, not spending powers. A loan from a Fed facility can provide a bridge across temporary interruptions to liquidity, and those loans will help many borrowers get through the current crisis. But the recovery may take some time to gather momentum, and the passage of time can turn liquidity problems into solvency problems. Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery. This tradeoff is one for our elected representatives, who wield powers of taxation and spending.

Those are Powell's exact words in a speech he made yesterday. Following the Speech there was a Q&A in which Powell addressed negative interest rates.

For discussion, please see Negative Rates Are Not an Option

Panic Sets In

The Fed seldom mentions actions that Congress needs to take. Yet, we have back-to-back messages from Powell and Kashkari on the need for free more free money from Congress.

This is a clear sign of panic.
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Mish 

Comments (70)
No. 1-23
Bam_Man
Bam_Man

How "Money" Dies.

ToInfinityandBeyond
ToInfinityandBeyond

C’mon Mish. We all know there is no such thing as free money.

Fud
Fud

Typo, should be 700, since 70 isn't YUGE! "huge 70-point"

Tony Bennett
Tony Bennett

Kashkari campaigning hard to be next Chairman.

Mish
Mish

Editor

I was referring to the S&P - added that in

Maximus_Minimus
Maximus_Minimus

There was a rare, relevant ZeroHedge article saying about the same. The gist: the more you print, the more you will have to print.

Mish
Mish

Editor

Editing now works - You should be able to correct typos easily.
Click on the three dots

tokidoki
tokidoki

Actually that means there would be another leg lower in the stock market first, because it's hard to justify extra spending if there's no panic in the real world.

Tony Bennett
Tony Bennett

"The Fed seldom mentions actions that Congress needs to take."

...

They need to stay in their lane.

As is, they are doing a piss poor job in their monetary lane.

Leave fiscal issues to the idiots in Congress ... at least they answer to voters.

Tony Bennett
Tony Bennett

Last thing America needs is Kashkari - man behind TARP, ex goldman sachs, kook who lived in cabin following TARP, uber negative interest loving dove.

Casual_Observer
Casual_Observer

He isn't wrong. A V-shaped recovery is off the table unless there is a miracle cure. I do expect unemployment to be back to single digits before the end of the year. My forecast is things will improve dramatically after September 24, 2020. If they can get the death rate down to flu-like levels with an open society by then, then people will feel more confident in resuming normal life.

Zardoz
Zardoz

Looking more and more like KaPoom theory....

Webej
Webej

So all this time we have just let people bite the dust, bankrupt, destitute, miserable, homeless, and hungry. However, society was perfectly just and equitable, so their fate was in perfect accordance with what they deserved -- it was their own choice, so to speak. No question of shoveling some money in their direction.

Now however, it is not people's own choice that they are out of money, so we need to get money to them, pronto, without limit, especially those who have billions and stand to lose billions: money can be no object.

O, by the way. If people were ever told that we had run out of money or money doesn't grow on trees, that was a misapprehension in the sense that it was not technically correct, but just a figure of speech, so to speak, to help them understand.

Stuki
Stuki

"I just think money in the pockets of people who have lost their jobs is what we need right now"

Paying people to lose their jobs is what we always need, when too many have lost their jobs already......

I know it's not popular around here, but this is the sort of nonsense a UBI/Citizen Salary can help combat (assuming you are going to have a government big enough to run around "helping" people either way).

With a UBI in place, there simply is no more "starving in the streets" argument. And a lot harder for the but-I'm-a-special-snowflake set to argue for why they, in particular, somehow "deserve" more than anyone else; just because they happen to be less frugal wrt the zip code they choose to live in, or because they have let Illinois politicians lie to them about all the millions and billions they will get "soon someday, you just pay me now."

With a UBI, there is no such thing as an "incentive not to work." And if you want more, since everyone else gets the same by definition, the actual cost of any expansion, is much harder to cover up.

FromBrussels
FromBrussels

NO PROBLEM ! We are merely 4 billion too many human planet destructuve, wanton consumerism craving predators on this planet ! Evwything gonna be awrigt when we re 4 bln or less ....again...at one point...knowing that we shouldn t be 8 bln never again....Wishful thinking ? Probably, I won t be here much longer, 20 years statistically , so I don t give a shit ! Look at all those fools running around with fckn masks on their fckn faces, everyone scared of everyone, IS THIS LIFE ? F U C K life then !

Casual_Observer
Casual_Observer

I love this blog but it has even turned me (the eternal pessimist) into an optimist.

Jojo
Jojo

Kashkari just like to hear himself talk. He is surely bucking for a higher position. But even worse is the latest free money bill that the House Dems have cobbled together. And then there is CA, where I reside, which is counting on at least $33 billion in free money from Washington so they can continue to provide hotel rooms for the homeless among many other questionable financial giveaways.

5 Key Provisions in Democrats’ COVID-19 Bill That Will Hurt Our Economy
May 12, 2020

House Democrats have released a completely unserious proposal to respond to the public health and economic crisis the nation is confronting as a result of COVID-19.

Spanning more than 1,800 pages, the bill represents a partisan laundry list of mostly bad policies, calling for trillions of dollars of additional deficit spending on handouts and items unrelated to the crisis.
...

Sechel
Sechel

It's misguided for the Fed to simply keep lowering rates. Any action taken to address this crisis must be fiscal. Problem is Congress and the Senate lack the will to act all too often and they along with the President look to the Fed to bail them out. Something to remember when we criticize the Fed for doing too much.

numike
numike

White House would likely support a new round of stimulus checks, sources say
When do I get my check???

BrainDamagedBiden
BrainDamagedBiden

I wonder how Powel figures that lending to the US government isn't the same as spending. Just because you perform a head fake doesn't transform the act from what it is: a blatant print and spend policy. I suppose if you buy the whole democracy ruse, then, our nobel elected officials are just giving the public what they want. Or to quote Mencken, "Democracy is the belief that the common people know what they want, and deserve to get it good and hard."

Realist
Realist

One of the interesting consequences of the pandemic that keeps coming up in comments is about individual freedoms and rights, free enterprise, and governments infringing on such things.

Many Americans citizens and companies complain about the government telling them what to do.

For example, the US government wants to mandate the domestic production of certain essential medications, personal protective equipment, computer chips, etc

And speaking of all that free money:

Some in government are also suggesting that with millions of newly unemployed, that the government should hire hundreds of thousands of testers and tracers to help track and stamp out the virus (if you are going to pay the unemployed, perhaps you should hire them to do something useful instead).

Just wondering how people feel about the US government mandating what should be produced in the US and whether they should hire a million testers and tracers.

Democritus
Democritus

Printing money is a zero-sum game, it just shifts wealth around. So in times that foreign countries hold a lot of dollars and treasuries, the total net effect for US citizens has to be positive... Or what am I missing?

Advancingtime
Advancingtime

The National Debt Clock is flashing a major warning, Red Alert! All this, of course, is in play even before it was announced that House Democrats have powered through the House another $3 trillion coronavirus relief bill.

America's debt has soared past 25 trillion dollars and is now expected to leap by several more by the end of the year.

This debt surge would have been unimaginable just a year ago and adding to our woes is the road ahead appears bleak. More on why this is unfolding so rapidly in the article below.


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