Two weeks ago, Fed chair Jay Powell declared the “fundamentals of the U.S. economy strong,” while simultaneously announcing the largest interest rate cut since 2008 in the face of global pressures stemming from the coronavirus.
Last week, the Fed escalated its repo operations in a desperate attempt to boost short-term liquidity for large financial institutions.
A few years ago, I got very excited about pluralistic economic thinking.
My family spent our spring break enjoying the coast of Mexico and returned home to a world we barely recognized. Many stores were closed early because their shelves were bare. Shoppers feared the effects of a pandemic and being stuck at home without necessities, so they rushed out and bought up every bit of toilet paper in the city, even the crummy single ply stuff. With this huge increase in demand for toilet paper, why are we not seeing increased prices to allocate the resource rationally?
The coronavirus is reminding everyone that you cannot rely on government and that ultimately it is the private sector that will provide the solutions. Many nonmedical government officials and members of the media are predicting massive cases of COVID-19 and death, when in fact no one can predict the outcome. What we do know is that government has created a full-blown national panic, when at this point the normal flu season is far more deadly.
Decentralization is critical to a functioning society but often precluded by federal regulations.
To read or watch the news in today’s world is to be confronted with a wide array of stories about financial organization and financial institutions. News about central banks, interest rates, and debt appear to be everywhere.
There are some very disturbing calls for quick-fix “solutions” following the reporting of how countries have and have not handled COVID-19. It is not about how contagious or dangerous the virus actually is, which is not my expertise, but the typical and dangerous misunderstanding of the supposed efficiency of hierarchy and, therefore, the effectiveness of control societies, authoritarian rule, and dictatorial regimes.
As I write this, the DJIA has just closed down over 2,300 points or 9.99 percent and the S&P 500 is down 9.51 percent. This is the market’s largest daily decline since the crash of October 22, 1987. And this is despite the fact that the Fed announced a “liquidity” injection of over $1.2 trillion into credit markets via term repurchase operations starting immediately.
