Posted Mar 23, 2020 by Martin Armstrong
The Federal Reserve called a third emergency meeting to combat the economic impact of the unprecedented hyped coronavirus. A lot of emails have come in noting that Socrates had forecast the first interest rate cut by the Fed and its next target was March 23rd as we published back on March 3rd. Many have asked if they are all just now following Socrates since the elite dumped their stocks and bonds on the ECM and the Fed responds when Socrates predicts they will. I do not know who is following. They can subscribe under a name provided they have a real credit card. I can say that so many millions of people were trying to get in that they were taking down the gateway and we can handle a lot of traffic.
Here on Monday 23rd of March, 2020, the Fed unveiled a number of new and “extensive” measures intended to expand their efforts to calm corporate debt markets. The Fed also said a direct lending program to Main Street businesses will be announced soon. The Fed has expanded the scope of its asset purchases under its quantitative easing program and announced four new measures which are a return to the original design with respect to commercial paper and corporate bonds. They are also including ETF markets.
The Fed also committed to the “establishment of a Main Street Business Lending Program to support lending to eligible small-and-medium sized businesses.” The Fed estimates the impact of its measures to provide about $300 billion in new financing available to businesses.
“While great uncertainty remains, it has become clear that our economy will face severe disruptions,” The Fed said in a statement Monday morning. “Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate.”
However, the Fed has also announced that it was suspending its previous guidance on quantitative easing, which sought to buy “at least” $500 billion in U.S. Treasuries and $200 billion in agency-backed mortgage-backed securities “over coming months.” The Fed now says it will purchase securities “in the amounts needed,” and will also expand the scope of those purchases to include agency commercial mortgage-backed securities. In addition, they announced their Primary Market Corporate Credit Facility (PMCCF) that would directly purchase eligible corporate bonds from investment-grade issuers. Additionally, they will add a Secondary Market Corporate Credit Facility (SMCCF) that would buy corporate bonds in the secondary market, which could include some eligible investment-grade corporate bond exchange-traded funds. Both of these programs will last until September 30, 2020.
A Senate bill proposed by the Republican leadership includes $350 billion in loans for small businesses to cover payroll, rent and some other expenses for the next four months, and includes loan forgiveness for the portion covering wages. The sheer scale of help needed because of this insane shut down is far more massive than many realize. There are nearly 10 million firms that would be eligible under the Senate bill, which applies to companies with up to 500 workers. They employ more than 100 million people and burn through $100 billion in weekly wages.
It makes sense that businesses that are ordered to be closed should have all business loans suspended without interest and all rents suspended while the state governments should void all property taxes during the period they shut down their economies. The states MUST bear responsibility for their draconian actions. This should NOT just impoverish just the people and businesses. The States must also feel the impact of their orders.
The volatility will remain high into the week of April 6th, 2020.