Here we go with the same old hypothesis over the Quantity Theory of Money that Trump is (1) nationalizing the Fed, (2) the Fed’s actions are worse than the virus, and (3) Forbes proclaims that the Trump & the Fed are destroying the dollar. It is really fascinating how these propositions running around are not only foolish, but the classic myopic view that the world begins at the California shoreline in the Pacific and ends on the beaches of Virginia at the Atlantic. Oh yes, there is Canada to the North and Mexico to the South. But who pays much attention to them anyhow. Canadians just come to America for holidays and Americans go to Mexico for a holiday and to eat Tacos.

The Washington Post showed not only its profound bias against Trump, but also its total ignorance of financial history and the Federal Reserve. They reported:

The economic debate of the day centers on whether the cure of an economic shutdown is worse than the disease of the virus.  Similarly, we need to ask if the cure of the Federal Reserve getting so deeply into corporate bonds, asset-backed securities, commercial paper, and exchange-traded funds is worse than the disease seizing financial markets. It may be.

If the Washington Post ever bothered to do actual research instead of just promoting their personal political agenda, they might discover that the original design and purpose of the Federal Reserve was to support the economy directly. They were to buy corporate paper to PREVENT companies who could not borrow when banks were hoarding cash from laying off their employees. It was Congress that usurped the Fed for World War I and directed them to buy government paper EXCLUSIVELY. Congress effectively nationalized the Fed a long time ago transforming it into a quasi-government agency. That much the Washington Post is using to blame Trump.

The Washington Post’s slogan is Democracy Dies in Darkness. So, why are they constantly only pushing their political agenda? Are they not keeping the people in the dark?

They have conveniently forgotten that there was TARP where the government poured a trillion into banks who never lent out the money because they had no confidence in the future. They then turned and pleaded with the Fed to create the Excess Reserve facility. So, TARP only bailed out the banks but not the economy – hence no inflation. Already, Excess Reserves are rising again showing that banks are once more NOT lending but hoarding. Banks will ALWAYS act in their own self-interest. They are not there to support the economy.

This is the first time the Fed is returning to its original design – direct lending to the economy skipping the banks. The Washington Post is clueless because they look at everything as a way to bash Trump and hurt the country just for their personal political view.

Then we had Forbes Magazine which is trapped by the Quantity Theory of Money and like a fool who keeps sticking their finger in an electric socket and expecting a different result, keep declaring that increasing the supply of money will destroy the dollar. They even can’t figure out why the Euro rallied and of course just blamed Trump. Instead, they talk to biased crypto people who proclaim the Fed balance sheet will rise to $10 trillion and this results in the headline:

Donald Trump And The Fed Are Destroying The U.S. Dollar

They had the audacity to claim the rally in the dollar was ONLY short covering. These people are biased and have no idea of what is happening outside the United States. It very plain, Trump is NOTnationalizing the Fed. The Fed was a steady process of nationalizing it since World War I. For the FIRST time the Fed is departing from Keynesian Economics because it knows that won’t work. Europe needs this crisis because it has no power to deal with the economy when the central bank is trapped in negative interest rates. The ECB is now pushing CoronaBonds, because it cannot continue to support the European member states. Netherlands and Germany are opposed to the idea. The only way to break the backs of Netherlands and Germany is to propel this crisis as the justification to federalize Europe.

The Euro has rallied BECAUSE capital is being taken home to cover losses everywhere. These people are obviously ignorant of what a LIQUIDITY CRISIS is all about. At the WEC in October, we warned we were entering a Liquidity Crisis stemming from the rise in Country Party Risk and this would be a different crisis all together because we faced a Bond Bubble. What is unfolding should be no surprise. The markets have been showing this would be the outcome since the Repo Crisis began September 17th, 2019. They have also no clue what big money does on a quarterly basis. I suppose this gives new meaning to the saying: Ignorance is Bliss!

Obviously, they would not do this if there was not also a panic for cash.

COMMENT: Hey, Martin.
Thanks for your models and the key insights. My wife, who is an ER nurse, came across this article recently. She read about 90% out loud to me as she believes, based upon her medical knowledge and overall disgust with the hysteria around COVID-19, that this post gives some great perspective on the virus and its economic impact. It’s worth a read, and perhaps a repost to your blog:

PT

REPLY: This entire affair has become a war against Trump. It is no longer about the virus nor is it about what is best for the country. A recent piece in the New York Times talked about Liberty University’s spring break would be over and its president, Jerry Falwell Jr., spoke with the physician who runs Liberty’s student health service. Dr, Eppes replied: “We’ve lost the ability to corral this thing.” He did not urge Falwell to close the school. “I just am not going to be so presumptuous as to say, ‘This is what you should do and this is what you shouldn’t do.’”

The New York Time then reports that Mr. Falwell is a “staunch ally of President Trump and an influential voice in the evangelical world.” When anyone disagrees with the panic they are being deliberately mocked. The media is in full swing to take down Trump. Anyone who dares to disagree with their position to shut down the world economy is being blocked as Twitter has done with the President of Brazil who was urging people to return to work.

This is becoming an all out coup. Freedom of speech is suppressed and anyone who dares to disagree with the left is isolated, hated, and mocked. The world these people are creating will be very dark indeed. They are encouraging civil war at every turn. People cannot be locked down. Already people are starting to rob stores, break-in and looting food in Italy, and we are just getting started.

In England, you are only allowed outside your house once. Neighbors are encouraged to report on each other exactly as they did behind the Berlin Wall. One of our readers who lives in a wealthy suburb of London reports that a neighbor’s house where they are not there has been looted three times. The police finally arrive two days after the third time and said bad luck.

What the press is doing to society this time around just to defeat Trump and right is not only casting us into a new age of totalitarianism, but we are not coming out of this in any possible way where it will be a return to business as usual. The press is aiding and abetting the overthrow of democracy all to desperately change the balance of power.

Many people didn’t like the forecast that China would supplant the United States as the next financial capital of the world. Some emails were outright nasty. I do not think it takes that much imagination to see why Socrates will be correct. The West is committing economic suicide. Asia is returning to normal as quickly as possible. We are engulfed in the collapse of socialism and governments conspiring to eliminate paper currencies, seize all assets including cryptocurrencies, and force everyone into their digital currencies to ensure 100% control of our financial lives.