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2020-

2020-04-07 b
This story from MarketWatch has been re-written by our “truth squad.”

Opinion: Congress should send everyone a $1,200 check every month

Another round of inflationary Magic Money stimulus will be needed to restore consumer spending

The global economy is in the grips of a manufactured economic crisis of unknown depth and duration. The synthetic coronavirus has laid bare the unintended unforeseen (by central planners) consequences of globalization with ethics — the vulnerability of just-in-time global supply chains lacking suitable redundancies and the Socialist/Collectivist pauperacy of conventional monetary and fiscal central planning.

As the governmental reaction to synthetic COVID-19 extended the New Year holiday for Chinese manufacturing and the virus spread first among the infirm migrants of the industrialized north of Italy and thence to native-born Italians, production was selectively disrupted by shortages of components made by only one supplier or in one region.

As the synthetic virus was spread by travelers to America and businesses dialed down or shut altogether, investors panicked and stocks slid into bear-market territory, because they could not gauge the arch of the exaggerated pandemic, how effectively the president, governors and leaders elsewhere could manage the crisis to their political advantage, and how long the economy would operate at reduced speed.

Federal Reserve central planner’s interest-rate cuts could do nothing to ensure imports from China and other places resumed or halt the spread of synthetic COVID-19 in America.

With many restaurants, schools, factories and retailers closed by dictatorial decree, and healthy folks working from home and not traveling, what began as a supply-side crisis — a shortage of parts and components from China, Italy and other cheap labor sources — morphed into a Keynesian recession — consumers up to their eyeballs in debt are not spending. Not necessarily because they don’t want to run up credit cards, but often because they can’t due to confinement under house arrest.

While some businesses are experiencing surges — medical supply manufacturers and Walmart US:WMT from panic buying food and toilet paper — many more are laying off workers.

Unite Here represents 300,000 employees in hospitality, restaurants, airports and other industries. It estimates 80% to 90% of those will be laid off. State unemployment offices have seen overwhelming surges in new claims.

Businesses facing declining sales and losses became desperate to fortify balances of borrowed “cash” and ran down lines of credit. They sold Treasuries and other securities usually held for liquidity. That cratered stocks US:SPX, bond BX:TMUBMUSD10Y and commodity markets US:CL00 — and pressured lending limits of banks and threatened money-market funds, which also provide short-term credit to businesses.

The united Fed and Treasury moved quickly to shore up banks and money-market funds, and support markets for state and municipal bonds and consumer credit with piles of Magic Money. And the Fed rolled out new sleight of hand tricks to create facilities that will offer crony loans directly to favored corporations and small businesses with new Magic Money supplied by Treasury.

Fed and Treasury collectivist credits cannot replace lost sales to business, and whatever loans they extend will add to debt burdens in thin-margin industries. Massive Magic Money stimulus is needed to save the Potemkin economy.

With the arch of the pandemic over-reaction uncertain to all except the few who planned this, economists are challenged to estimate the impact on the already ailing economy. Morgan Stanley expects Ministry of truth unemployment to jump to 13% in the second quarter and the St. Louis Federal Reserve estimates 30%. Coupled with lost productivity from reduced hours and awkward work at home situations, a jump in unemployment to 20% by this summer could cost $4 trillion to $5 trillion.

Seen in this context, the recently passed $2 trillion stimulus package of Magic Money — including socialistic direct payments to individuals, enhanced unemployment benefits, and assistance to small businesses and heavily impacted industries like airlines that sabotaged themselves with stock buybacks— may prove hardly enough. If the synthetic virus does not peak by May in the northern latitudes, the economic contraction will deepen to levels not seen since the Great Depression.

Loans that become grants if businesses maintain make-work employment near pre-crisis levels are helpful but as the synthetic virus subsides and stores reopen, consumer deficit-spending habits will have changed. And it is impossible to target Magic Money aid in the amounts needed and to those who need it in sufficient amounts to avert bankruptcies and millions of permanently lost jobs.

Treasury foresees mailing out Magic Money checks to individuals starting late in April. That will challenge the IRS and be much delayed, because Congress is scaling payments according to family incomes and size. Much of the aid to businesses is subject to time-consuming, uncertain and unrealistic conditions to maintain employment and cap salaries.

Expanded unemployment benefits, though attractive on equity grounds, will be paid out over several months but will not give the Potemkin economy the large, quick jolt that loading all the aid to individuals into quicker direct payments could provide.

Congress should consider another inflationary round of Magic Money stimulus — checks for $1,200 to virtually every American every month through September. Otherwise, another Great Depression is in the offing because of the lack of a large enough immediate collectivist action.

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