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How this could play out

Mar 16, 2020 | 00:32 1 We have a Coronavirus induced economic tsunami, crashing into a financial system that was on the brink of unsustainability in many regions and industries, and due for a cyclical crash. Even if this ends tomorrow(and all indications are the western world is closer to the beginning than the end), the damage done is going to lead to a cascade of bankruptcies and default at every level, from personal to business to banks to pension funds to municipalities and countries, avoiding that is going to require massive intervention. We can argue about if that is the right approach, if it is only kicking the can further down the road, and if a reset is probably the best outcome, and about letting the free market sort it out to be stronger on the other side, but right or wrong, this is what governments and central banks know, and this is what they do and are doing. Besides, no one asked me...

The concept of helicopter money is going to become reality. They will be so desperate to get funds out to where they can do the most good in the least amount of time that they will try any and everything.
Faced with a worldwide ( and worldwide is the key) debt deflation spiral, a lot of money can be injected (and probably in a coordinated worldwide manner) from literally thin air without fear of inflation or hyperinflation. As we have seen, the first priority is keeping the credit markets from blowing up, since that wouldn't be easy to undo if it happens, and it will take everyone down when it does, so money is going there in unfathomable quantities, and evidently it is working.

Next will be money directly to individuals. It will be much more effective to keep the consumer whole so they can make their mortgage payments, and keep spending, so the banks and businesses can survive, than to try to do it top down through the banks and the businesses.

Next will be keeping businesses viable. This could include grants, debt holidays, interest free loans, or buying their products (or services)and distributing them just to get people back to work and get the supply chains functioning again. This could easily include buying farm products or their finished products at subsidised rates, distributing them to people out of work, or in quarantine, or suffering from the current locust plague etc. And food security has suddenly gone from something that no on in the western world even considered, to one of peoples top concerns. There will be stockpiling on a personal level, at the industry level, and at the national level, possibly with monetary incentives, given how closely matched supply and demand are, and how inelastic supply is in the short term, this is bullish ag commodities for years to come. There will be so much money looking for a home, and there will be fears of inflation, and that will drive money into tangible and useful commodities.

Of course, that assumes that we can survive the short term, which may well include commodities going no-bid if the infrastructure isn't functioning, regardless of what the paper value of them might be, credit issues, or a complete lack or credit, input shortages, and irrational markets where everything gets sold to make margin calls.

Flame away, show where I am wrong, and we won't be net beneficiaries of the panic. Reply With Quote

  • Mar 16, 2020 | 00:42 2 Yep, played hockey this weekend and one of the guys that was supposed to be there, works at fcc head office, was a no show. He got locked up till midnight or something Friday and was on duty all weekend. I suspect they are going over their exposure, not the individuals. We are gonna get printing like never seen before, they are pulling the plug on being reasonable. Eventually and rapidly this is gonna go absolutely sideways. Saw the food bank in Edson got robbed. Im long pitchforks and torches, this thing is coming unglued as everything we believe to be true, will be proved wrong. They closed all the MGM hotels. First time evah. Those that rely on govt to provide are most vulnerable to flu. I suspect the flu isn't very pc. Those with resources will come out relatively unscathed assuming there is no underlying immunity issues. When the masses figure it out, they'll hold govt accountable for the failure. Complete loss of confidence in govt. This might take more then the first wave, if it comes back next winter mutated, and this looks like a giant joke in a couple weeks....... Da end.
    Last edited by macdon02; Mar 16, 2020 at 00:50.
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  • helmsdale's Avatar Mar 16, 2020 | 05:42 3 AF5, it makes sense, but alot of what happens goin forward isnt going to make sense I'm afraid. As Macron said, I'm bullish pitchforks and torches. And that world historically hasn't been kind to farmers... nationalization, forced collectivization, seizures of foodstuffs, price controls, etc.

    Governments will trample us into the ground for short term gain if need be! Reply With Quote
    Mar 16, 2020 | 06:07 4 Interesting that they can shut down everything that affects the markets but won't shut down the market until the guys that like to panic have taken a valium.... Reply With Quote

  • Mar 16, 2020 | 07:30 5 It will take trillions to paper this over. Trying to prop up a poorly designed system that was designed by the guys trying to prop it up. Why not call a debt jubilee and be done with it all. Debt is going to all be on the CBs balance sheet anyway. Next up is individual industry bailouts. Reply With Quote
    Sep 25, 2020 | 17:55 6 Just thought it was worth bumping this thread up. Looks like I wasn't too far off the mark when I posted this in March. Reply With Quote
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  • Sep 25, 2020 | 21:07 7
    Quote Originally Posted by AlbertaFarmer5 View Post
    Just thought it was worth bumping this thread up. Looks like I wasn't too far off the mark when I posted this in March.

    You don't have to tell your banker the truth anymore in Australia.... didn't think they'd pull "The Big Short" part II Reply With Quote
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