Monday, March 30, 2020

2020 Predictions

We are being lied to constantly from all sides, which is why it behooves us to have our own economic construct going forward. Some say it's a fool's errand to attempt to predict the future, I say it's a fool's errand to subscribe to Kool-aid laced pablum. None of what I write is politically correct. So those who are easily triggered would be best to move along to CNBS or Faux and Friends. These are assumptions based on currently available information which I will modify on an ongoing basis as visibility improves...

These are my economic assumptions for the coming 12 months:

As of March 30th, 2020

The death toll from the Coronavirus will continue to rise by the thousands, plateauing sometime in April remaining plateaued in May and beginning to recede by June.

The jobless claims will be measured in the millions and will continue well into the summer. The peak will come AFTER the economy is re-opened. 

The elderly will be disproportionately affected by the Coronavirus, while the young are disproportionately affected by unemployment. The competition between the health crisis and the economic crisis will turn up the heat to MAXIMUM panic mode. 

The ancient geezers in Trump's base, who could least afford to ignore this virus, have been under the persistent Trump-propagated belief that the virus is a liberal hoax. Soon they will see exploding infections and the highest mortality rates, caused by their own gullibility and a FATAL belief in their false saviour. Trump's body count among his alt-Christian base will be exorbitant. His approval rating will collapse like a cheap tent.

Historians will say that the Roman Senate's decision NOT to impeach Trump in the days before the virus outbreak, was literally fatal to his base. Trump and his useful Idiocracy will ultimately be viewed as complicit in the genocide of their constituency. The signature Republican policy of exploiting rampant ignorance will be relegated to the dustbin of history. The party that knows no shame, will finally know shame for the rest of time.


The liberal-biased media will continue to understate the economic impacts of the shutdown. The right-biased media will continue to overstate the strength of Trump economy. For both sides, these biases will be fatal. 

The unemployment rate will be 30% by 2021, which is in-line with Fed estimates

QE won't work this time around. QE only works when asset prices are going up, not when they are going down. QE works to accelerate momentum and to create asset bubbles. It does not prevent asset bubbles from exploding. QE does nothing for the economy. This was the experience of China and Japan and will now be the experience of the clueless Fed. The much-vaunted "wealth effect" will now operate in reverse. It will suppress investor confidence, business confidence, and consumer confidence. Those hiding in gold will be duly monkey hammered.

The mega fiscal stimulus package is already DOA. Too little too late. As it was with the tax cut, the liquidity tightening effects of $3 trillion treasury issuance will far outweigh the nominal economic impacts. The deflationary impacts of the Coronavirus shutdown are orders of magnitude larger in size than the stimulus package. The jobless claims to date are nothing compared to what is coming. The economy is now in a deflationary feedback loop in which the collapse in demand is causing more collapse in demand. 

There will be no more corporate bailouts after this one. Public appetite to bailout profligate corporations that binged on debt to buy back stock will be zero. The mainstay Republican platform of socialism for the rich is over. Muni bonds and corporate debt will head to zero. These entities will soon be unable to afford their debt service payments. Credit bubble collapse is inevitable if not imminent. 

Stocks won't bottom until we see widespread investor panic. Central banks and algos have already lost control over risk assets as we've seen from record limit down overnight crashes. The market will continue to trade in a widening volatility range. The Fed is about to lose control over ALL markets at the same time. At some point closure of the market for days or weeks is likely. The stock market rally will be viewed as the bottom. It won't be. 

The oil market is on the verge of wholesale implosion. Crude is heading for zero as storage for excess crude is running out.

We are almost there already:

Rampant deflation of everything will continue unabated until MMT for the masses arrives in size.

Trump will be voted out of office in November. Joe Biden only needs to stay alive for seven more months, a challenge in and of itself. 

MMT for the masses will arrive by December.

All of the lies that were bought and believed in the past decade will soon turn to dust and blow away in the wind.

Sadly, there is no zen second life for fools who believe they are above the inconvenient truth.