There is something positive to be said about the current Chinese Coronavirus pandemic.
There is little doubt in my mind that such a widespread crisis clarifies the situation and cuts through the typical political bullshit and media omissions and distortions. It reveals the difference between what you have been told and political and economic reality.
What have we learned?
Preparedness… The government, at the local, state, and federal levels, spent more than a billion dollars on disaster preparedness. Still, they seem uniquely unable to deal with the crisis without a healthy dose of politics. All of the stockpiles of disaster supplies were found to be outdated, missing, or simply nonexistent. Strategically essential states like New York and California seem to be unprepared even though both states face the ongoing threat of a massive natural or man-made disaster. It appears that large amounts of money were spent on meetings, commissions, panels, and of course, consultants who produce manuals and PowerPoint presentations rather than results. We have highlighted our vulnerability, but the local and state entities claim they are too broke to remedy the problem. Perhaps if they prioritize the use of their funds and cut back on supporting illegal aliens, welfare carpetbaggers, and non-essential grants, the money could be found.
The Federal Reserve 2020 stress test scenario appears to be a joke…
The severely adverse scenario is characterized by a severe global recession accompanied by a period of heightened stress in commercial real estate and corporate debt markets. This is a hypothetical scenario designed to assess the strength of banking organizations and their resilience to unfavorable economic conditions and does not represent a forecast of the Federal Reserve.
The U.S. unemployment rate climbs to a peak of 10 percent in the third quarter of 2021. This substantial increase in the unemployment rate is consistent with the Board’s Policy Statement on the Scenario Design Framework for Stress Testing.6 In line with the increase in the unemployment rate, real GDP falls about 8½ percent from its pre-recession peak, reaching a trough in the third quarter of 2021. The decline in activity is accompanied by a lower headline CPI inflation rate, which falls to an annual rate of about 1¼ percent after the first quarter of 2020, before gradually rising to average 1¾ percent in 2022.
In line with the severe decline in real activity, the interest rate for 3-month Treasury bills immediately falls near zero and remains at that level through the end of the scenario. The 10-year Treasury yield immediately falls to ¾ percent during the first quarter of 2020 and rises gradually thereafter to 2¼ percent by the end of the stress-test period. The result is a gradual steepening of the yield curve over most of the stress-test period. Financial conditions in corporate and real estate lending markets are stressed severely. The spread between yields on investment grade corporate bonds and yields on long-term Treasury securities widens to 5½ percentage points by the third quarter of 2020, an increase of 4 percentage points relative to the fourth quarter of 2019. The spread between mortgage rates and 10-year Treasury yields widens to 3½ percentage points over the same period.
Asset prices drop sharply in this scenario. Equity prices fall 50 percent through the end of 2020, accompanied by a rise in the VIX, which reaches a peak of 70. House prices and commercial real estate prices also experience large overall declines of about 28 percent and 35 percent, respectively, during the 5 first nine quarters of the scenario. <More…>
The Chinese Coronavirus stress test is more relevant, comprehensive, and accurate than any Federal Reserve effort. And, it seems that the Federal Reserve is willing to pump trillions into the system before the financial institutions take action themselves. What is not being mentioned is the “bail-in” provisions of Dodd-Frank, where a financial institution can use its depositor’s money to bail itself out rather than obtaining a taxpayer bailout. This is legalized theft – an unconstitutional government taking with no constitutional requirement for just compensation.
China…
The Chinese are not merely a trading partner as they would have you believe, but a lying duplicitous enemy that has taken advantage of the greed and corruption in America to buy political influence and access to our intellectual property. We need to hold this nation accountable for this preventable pandemic and those to follow as the night follows the day. We can no longer outsource the manufacture of strategically essential goods to China. One need only look at the Chinese propaganda campaign to deflect attention and responsibility for the Chinese Virus to see which politicians, media, billionaires, and others have been seduced by China.
Russia…
It is no surprise that they are capitalizing on our current weakness by attempting to destroy our oil and gas industry.
Saudi Arabia…
It is time to stop treating them as favored friends, but the adversary they are. The fact that they were majorly involved with the 9/11 terrorist attack should have placed us on high alert. The fact they are allying with Russia to destroy our domestic oil and gas production and nullify our energy independence is further proof that they are not our friends. To the extent they are willing to defend against Iran only means they need to take over their own defense and not outsource their protection to the United States taxpayer.
The limits of expertise and models…
We have seen the failure of both the experts and models. Thus, we need to be careful of blindly following the advice of experts who are opining on matters outside their field of expertise and in which they know as much as any other informed citizen. If something goes wrong, it is the fault of the data or ignored recommendations. If something goes right, it is their genius and insight that saved the day. What more can be said about models that faulty assumptions magnify errors and dodgy data produces garbage results?
Social Justice…
Once again, the poor and middle class are shouldering the burden of living in a time of crisis. There is no doubt in my mind that the un-American progressive socialist democrats are exploiting the crisis for political advantage. First, by pandering to a disaffected and dependent underclass which they need to gain or maintain political power. Creating victims for whom they will promise redress in return for political power. Supporting entire industries of poverty pimps, illegal alien advocacies, and entire bureaucratic structures to take care of these individuals while keeping them dependent on the government for sustenance, handouts, and giveaways.
Out of control public officials…
Even in a public emergency, there are limits to the power of elected officials, and they should be held responsible for their actions.
Funding our enemies…
We are just beginning to learn that the United States Government, particularly the National Institutes of Health, provided a $3.7 million grant to the Communist Chinese Wuhan Institute of Virology, the very group that is investigating the use of biological weapons of war. What else have we given our enemies to make them stronger militarily and more competitive economically? And, what have they stolen without pushback from politicians and others in government positions? Other contributors include the University of Alabama, the University of North Texas, Harvard University, and the National Wildlife Federation. How many Chinese students and interns have access to this nation’s educational, military, and industrial resources as students, interns, or eventual employees?
Media…
Little that is positive can be said about the corporatized and partisan media, which often omits, distorts, and adds contradictory commentary to legitimate news. Where the wall between reporting and commentary is paper-thin or nonexistent. Where sensationalism, exceptions, and worst-case scenarios drive the narrative – often causing a false sense of urgency or panic. Where useful perspective and reasoned analysis take a backseat to corporate politics.
Bottom line…
American has been given a real-life stress test. It remains to be seen if Americans are smart enough to learn from these lessons and hold those who have caused so much pain and suffering accountable?
Unfortunately, I think not.
People are too consumed with the circumstances of their own lives to think about the larger picture.
The politicians will do everything in their power to perpetuate and expand their corrupt existence. Both political parties are continuing to exploit the naiveté of the American people while they plunder the national treasury on behalf of themselves and their preferred special interests. The bureaucracy will continue to justify and perpetuate their existence while ensuring a life of relative stability and ease for themselves. The unions will continue to sell protection and influence as they corrupt everything they touch.
Wall Street will continue to promote instability to perpetuate the “churn,” which produces enormous profits from those who buy and sell stocks and continue creating plausible stories to explain each market turn.
The media will continue to prioritize profits and partisanship over truthful reporting.
Our enemies are now using our congress, namely the democrats, our universities, our ideologically-driven billionaires, and our media to crush our energy sector with their global climate change nonsense and our economy with their manipulation of currencies and commodities.
And there are those opportunists who use insider information to profit no matter which way the wind is blowing.
We have been given a once-in-a-lifetime to evaluate the trust, morality, integrity, credibility, reliability, and trustworthiness of others -- especially the politicians we choose to lead us. I wonder if we will use it wisely or squander it to the detriment of future generations?
And, “We the People” remain so thoroughly screwed.
-- steve