March 16, 2020
A massive interest rate cut and $700 billion worth of debt purchases by the Federal Reserve was not enough to stabilize the stock market.
During my guest appearance on Azzmador’s Dlive stream this past Saturday, we discussed the possibility that the hysteria surrounding the coronavirus could be more problematic than the infection itself. We specifically talked about some of the potential economic implications of this situation, none of which were good.
The banking system, the stock market and the economy in general has been under tremendous pressure because of this crisis. The Federal Reserve responded to the turmoil on Sunday by cutting interest rates to near zero and announced that they would begin buying large quantities of Treasury bonds and mortgage-backed securities.
The Federal Reserve took massive emergency action Sunday to try to help the economy withstand the coronavirus by slashing its benchmark interest rate to near zero and saying it would buy $700 billion in Treasury and mortgage bonds.
The Fed’s surprise announcement signaled its rising concern that the viral outbreak will depress economic growth in coming months, likely causing a recession, and that it’s poised to do whatever it can to counter the risks. It cut its key rate by a full percentage point to a range between zero and 0.25%.
The central bank said it will keep its rate there until it is “confident that the economy has weathered recent events.”
The Fed will buy at least $500 billion of Treasury securities and at least $200 billion of mortgage-backed securities. This amounts to an effort to ease market disruptions that have made it harder for banks and large investors to sell Treasuries as well as to keep longer-term borrowing rates down.
Basically what the Fed has done is create billions of dollars out of nothing on computers to buy debt. When you combine these debt purchases with the massive interest rate cut, the Fed has deployed some of the biggest tools in their arsenal to try and prop up the financial system.
Unfortunately for the Fed, this move has done nothing to reassure investors. Stock futures crashed and the only reason they didn’t go lower was because of a built-in mechanism designed to prevent the market from going down any further.
The U.S. Federal Reserve fired one of their biggest weapons Sunday evening in an attempt to cushion the Coronavirus economic blow.
— Tom Winter (@Tom_Winter) March 16, 2020
This is not a good sign at all. It shows that the Fed may have lost control over the situation.
Under normal circumstances, a Fed move this big would result in a massive spike in the stock market. The fact that it crashed shows that there are some real problems within the system.
It’s just too bad that Ron Paul didn’t win the presidency in 2008. He tried to warn everybody, but most Americans thought that he was a kook for even talking about the many obvious systemic problems within the Federal Reserve and central banks in general.
And as we know, these central banks are nothing more than Jewish systems designed to enslave nations and their peoples into debt servitude. There is nothing of tangible substance backing the currencies that they create on computers, and what we are seeing unfold is proving that in spades.
This coronavirus situation could be a black swan event that kicks off a major crisis within the global economic system. And while nothing is set in stone, things are looking quite bleak at the moment.