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.
Got gold?
Mish
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.
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?
The total net for all those 1% of US citizens, and 0.1% of foreigners, who get privileged access to the printed money, it may be positive. The remaining 99% of Americans, and 99.9% of foreigners, are the ones wealth shift away from.
Don’t be a Krugman. Everyone else being indebted to their necks to Jamie Dimon, is not the equivalent of everyone being debt free. Even if in the former case “we owe it all to ourselves….”
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.”
Your post only shows that you are not qualified to be a Fed Chairman. One especially unique qualification that you need to be one is the ability to believe that if you use your right hand to give your left hand something, then the whole thing should count as an arms length transaction.
The Fed goes crazy, and yet there’s no #FirePowellAndShutDownTheFed, heck there are WAY MORE people brandishing the #FireFauci hash tag.
Fauci might not be perfect but at least he tries to reason using science, whereas the historical record of money printing is unequivocal, you print too much, your nation’s economy and by extension your nation goes to hell.
This country deserves to go to hell.
Tokidoki, Henry Ford said it best: “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
I’m not with you on the country deserves to go to hell. There has been such poor leadership for so long with a full on propaganda campaign for the last 100 years. The murder of the American Dream is a travesty and politicians need to be held accountable for the crime they committed.
> There has been such poor leadership for so long with a full on propaganda campaign for the last 100 years.
Yeah, but the public should have grown wise to the scam long ago. I’m sure you’ve been around ostrich people as much as I have, the only conclusion is that they don’t want to know what’s going on with the Fed, the MIC, or the government. Willful ignorance is complicity at this point.
+1. Exactly this. The public all bought into the REAL American Dream i.e. joining the elite club and repressing the rest of us.
You get the government that you deserve. And they say the world ain’t fair. ROFL.
White House would likely support a new round of stimulus checks, sources say
When do I get my check???
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.
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Yikes who will want to sleep in a hotel that puts up the homeless. What’s their motto: stay with us an get your bedbugs for free.
I love this blog but it has even turned me (the eternal pessimist) into an optimist.
Lol, it’s turning me, an eternal optimist, into a pessimist. 😉
I have no idea what to be, lol.
I’m optimistic that our kleptocracy will finally come to an end within the next several years, but it’s tough to be giddy about the human suffering it will cause, both economically and psychologically for most of the population that never saw it coming.
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 !
Everything is temporary. Have a drink and take a walk outside and enjoy nature more. Life will get back to normal sooner than later.
The hard part is going to be getting from 8 or 10 bill to 4. Not pretty doesn’t describe it, and I too hope, it will happen twenty years from now or more…
Funny how the far fringe right (pro-lifers) have absolutely no compunction when it comes to killing people already alive, even if it is just to stand off to one side and say nothing when innocent lives are being lost.
The probable carrying capacity of the planet is actually quite a lot lower than 4 billion, more like 2.5-3 billion. But here is the thing, it is a LOT easier and a LOT cheaper to simply kill people than to have to think and spend for solutions to overpopulation. We are going to have to be very clever and spend incredible sums to mitigate the environmental impact of keeping at least 10 billion people alive, because that is how many there will be by the time we decide to act.
Ask anyone who lived in Germany in the 30’s and 40’s, it is far FAR cheaper to kill people than to house and feed them, provide energy and income, all without utterly trashing the planet. Even the mention of this is a slippery slope because it will eventually move from an obscure wish by sociopaths to active enforcement by psychopaths. One of the only ways to stop the destruction is social financial support. If people have to go out and generate all they need they can, at a terrible cost to the planet. If they need food and shelter but are stopped from obtaining it themselves then it is up to those stopping them to provide it and anything less is murder.
So, MM I agree with you, and I feel that From Brussels is either a psychopath or needs to rethink his stand on population as absolutely clueless at the least.
But then that is the attitude among many people who call themselves progressive or “Greens.” Militant hatred for all those useless eaters that are melting the ice caps , they have no answers, only an extreme demand that it change with zero thoughts about economics or any other kind of impacts. They are deluded and mostly crazy.
I can t make head nor tail of your comment and YOU say I am crazy ?! ALL I ever implied or tried to anyway, is that we are far too many on this planet and that nature will take care of it at one point and that s exactly what we deserve ! Judging by the present situation , the time of the reckoning might be nearer than we think. I am not right nor left nor green nor red…..just rational if that is still allowed… and again, I don t give a shit how it ends but I d hate having to spend my last quarter in a fckn surreal environment like the one we ve just created in just a matter of weeks….
Anyone that thinks an entire species has no redeeming value and deserves to die is a nutter. I do hope that THAT is not beyong your limited comprehension.
“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.
Agree. Most jobs lost over the last era are because of globalization and not through any fault of the employee. The system will be challenged in developed countries. I do expect the Fed and Congress to embrace MMT eventually. Even they can see the sham of the system they have created. We are nearly there now.
How is what we are seeing right now not “MMT”?
Because the Primary Dealers first “buy” (rent, actually) the Treasuries that the Fed eventually takes off their hands with freshly printed “money”?
Exactly. This is keeping up appearances. Ray Dalio was correct to embrace MMT so it can be co-opted further.
“Most jobs lost over the last era are because of globalization ….”
Financialization. Not “globalization.”
Every penny of the costs heaped upon American workers and those employing them, which have made it unaffordable for them to operate profitably in America, have been handed out in the form of “asset appreciation” to idle leeches, as well as bonuses for those getting paid directly as part of that “asset appreciation.” In America. Not somewhere else.
That’s where it’s all gone. Not to some mythical evil empire which we should all be gullible enough to tweet mean things about. Just to your neighbor who “made money from his house” instead of from doing productive work. And to those who “made money from the ‘markets’ ” instead of from doing anything useful.
Not saying either group is necessarily blameworthy, as they hardly have much choice but to leech in a Fed world. But still, if you want to solve a problem, you first have to understand what causes it. Otherwise, you end up just another useful idiot, actively, even if inadvertently, engaged in deflecting blame from where it is due.
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.
Looking more and more like KaPoom theory….
Eric Janzen. Used to follow him a long time ago. He was right. Only about 10 years early.
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.
“My forecast is things will improve dramatically after September 24, 2020.”
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Keep moving the goal posts … you’ll get it right eventually.
Back in March you were “june – ish” on rocket leaving the pad.
Incorrect. I always stated late-September. Things will improve this summer economically just because people are out. But I also always expected an uptick in cases and deaths this summer. I pointed out very early after studying the IMHE model that if things opened up the model would proceed towards its upper bounds of death model which is exactly how things are playing out. Even that model was too low in it’s estimates for deaths by now.
“Things will improve this summer economically just because people are out.”
…
This is what I remember. Credit tightening as I type belies a different scenario.
That can and will happen for a good chunk of the country. But the top 10% of earners were responsible for 80% of consumer spending anyway. What’s needed is enough confidence to open the economy up. We don’t have that yet. We won’t until the fall.
I can figure out if you are serious with the top 10% spending 80%.
If you weren’t joking you are just dead wrong. The top 10% may spend a large amount of non debt money but the bottom 90% is the heart of the economy. They may do it with debt but regardless they still are the engine.
This has been the case for over a decade. The top 20% are responsible for about 70% of consumer spending and the top 10% is around 80%. I’m not sure about debt vs cash but it is no joke. The middle class disappeared in America after the great recession. It will continue to be hollowed out.
I haven’t seen any forecasts at all, from anyone, for next fall and winter. The only forecasts I have seen are for where we will be as of the end of July. The assumption is that nothing much will happen from July until it gets cold again, and the virus clearly spreads faster when it is cold. What will happen then? Will the virus be eliminated over the summer and vanish completely before fall? Will it start spreading fast again? If it does, will we lock down again, or just let it run until we reach herd immunity?
Those are very different outcomes, and they also have major ramifications for the election this fall. If it vanishes over the summer, I think Trump will win. If the death rate jumps fast in October, I think Biden wins. If I were for Biden, I would want to see the economy reopen enough to keep the virus spreading, so as to have a bad October. If I were for Trump, I’d want to try to eliminate the virus now as much as possible. Truth is, I’m not for either, so I’ll just watch and see what we do.
It will soon be single digits. We’ll adjust the participation rate accordingly.
Did your oracle disclose anything about the nature of the miracle cure, in addition to being due the afternoon of September 24?
“We’ll adjust the participation rate accordingly.”
…
Yes. A lot depends on how long they extend UE benefits. To stay on benefits need to actively look for job … and thus count in the labor force. If benefits curtailed quickly (haha) then many will leave work force and not count as unemployed.
Put me down for repeated stimulus packages into next year (providing UE benefits) which will serve to keep UE number high.
Who said soon ? The end of the year isn’t soon. And unemployment has already been extended beyond then (38 weeks). I don’t think getting down to single digit (below 10% on U-3) by December 31, 2020 is a big hurdle.
No miracle cures. Just a better handle on what works on this virus and course of treatment that can work on the most severely ill should they land in the hospital or ICU. Thank goodness for medical science and research. We won’t have to endure what those that lived during the flu pandemic of 1918.
Last thing America needs is Kashkari – man behind TARP, ex goldman sachs, kook who lived in cabin following TARP, uber negative interest loving dove.
I see nothing about negative interest rates in his history. He actually said last month the Fed has no interest in negative rates and that fiscal policy (Congress) should do their jobs.
Maybe, I was a tad harsh. Though, he didn’t rule out. Here in March:
“I don’t think there’s much interest in going below zero,” Kashkari said. “None of us want to say no, never.”
Having said that the Federal Reserve is so predictable. Kashkari will be pushing for NIRP soon enough (because it will be what Mr Stock Market wants).
Negative rates won’t be needed only because there is plenty of liquidity and ability to go lower before even contemplating going negative. There will be a known method to treat Covid-19 and the world is not going to end.
Federal Reserve follows the market.
Not the other way around.
Not quite – Another review of this idea coming up
It is a symbiotic relationship but be assured money comes from the Fed/Treasury. Hence the concept of the “Fed put” . This market won’t necessitate negative rates. The Fed has successfully chased most bondholders back into stocks in order to prevent the real crisis – pension funds.
> It is a symbiotic relationship ..
But which is parasite and which is host?
It’s more like the market is telling the FED, through its mouthpieces, what interest rate it wants, and the FED has faithfully delivered, or else the market crash.
“The Fed seldom mentions actions that Congress needs to take.”
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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.
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.
A parade of billionaires (druckenmiller, buffet, tepper) saying market is overvalued.
Tells me they have dry powder and want an opening to buy lower.
Editing now works – You should be able to correct typos easily.
Click on the three dots
It has been working for me for longer than I can remember.
There was a rare, relevant ZeroHedge article saying about the same. The gist: the more you print, the more you will have to print.
I was referring to the S&P – added that in
Kashkari campaigning hard to be next Chairman.
Actually I think the tide has turned towards Bernie Sanders.
You need to rob Kashkari’s head for good luck.
And 100 years later….
facing deflation….
Could the US be following in the footsteps of the Weimar Republic?
Don’t worry, this time is going to be different.
Typo, should be 700, since 70 isn’t YUGE! “huge 70-point”
I was referring to the S&P – added that in
C’mon Mish. We all know there is no such thing as free money.
How “Money” Dies.
Money … dead since 1971.