The Battle Lines Are Being Drawn!
by Eric Nager on Mar 25, 2020
This morning (March 23) the Fed announced that they will provide “unlimited QE.” This means that whatever the government wants to spend to combat the effects of Covid-19 will be backstopped by the Fed. In the 2008-2009 crisis, the world was shocked when they added $3.5 trillion to the balance sheet through QE. Now that seems like “small potatoes” in relation to what they are presently doing.
Why is the market not soaring on that news? The problem that remains (aside from the virus itself) is the fact that the politicians can’t agree and pass the legislation necessary to get the financial relief to the people. Unfortunately, it seems that some political types care more about their personal gains than about the well-being of the American people. We believe, however, that eventually some of their pet projects will be included so that the legislation can pass – hopefully today!
Once they pass the bill, then the challenge of working through the mechanisms of government to send out money will be the next task.
All of the above just sets the stage for the real battle. The damage done by virus itself, the state and local government shut-downs will have to be overcome by successive waves of money until the people’s fear is put to rest. We believe that this will be accomplished and, ultimately, we will be victorious; but in the interim we are wary of the federal government’s inability to act. Unless they show that they can and will act expeditiously, we will have to become even more defensive. Stay tuned.
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From your team at Southern Capital Services