The unprecedented bailout Fed of everyone and everything that could prevent total Collapse

The passage of the pandemic stimulus bill in the amount of at least US dollar was announced breastfeeding as an important step $2.2 Katherine massive economic toll to nearly complete the US shutdown. But the numerous initiatives by the federal government, the impact of this stimulus bill may ultimately pale in comparison with the radical measures taken by the Federal Reserve. We are in uncharted waters and deep, but no one can prove to be as revolutionary as what the Fed will do. Graced by Congress and the Treasury, the Federal Reserve committed to inject their budget with more than $4 Katherine economy. This is not a typo. And it is probably much, in fact, that to be more than subsided in time of pandemic crisis. This is not directly in the pockets of the people, at the end, but the financial system with unprecedented amount of money and to provide a cushion and a plan for almost every marketable investment floods. And from any tradable good, and funds from the market means money, corporate bonds, municipal bonds, bank lines of credit, loans, mortgage-backed securities and Jerome Powell, the chairman of the Federal Reserve, perhaps even actions. When asked what he could buy the Fed on possible outer limits, Powell said, with unusual frankness that in a time of pandemic “We are trying to create a bridge between our very strong economy in a place other than the economic strength and is that our credit really does. it ‘very wide. it is evaporated to small, medium and large enterprises. ” It also extends to state and local governments need money as tax revenue. It extends fact, just about everything and can imagine nothing. It is impossible to overstate how radical a departure from historical precedent these movements. While experiencing the great recession of 2008-2009, the Fed cut interest rates to zero (as it does now) and then started what it calls “quantitative easing” called on multibillion-dollar scale; began to buy bonds and to act as lender of last resort to large financial institutions, the potential failure of the face, and the European banks and the European Union its own crisis in 2011. But as innovative as it was dealt with, it took many months then act for the Fed since the financial crisis had already metastasized to an economic collapse, and its purchase was limited to specific and rather obscure corners of the financial markets. Today, the Fed has acted in a few days, and has its emergency lending powers to some extent unleashed never seen or even really considered before. Across the Atlantic, the European Central Bank is engaged in similar activities, although by law, has set limits to what we can do. Due to the global integration of financial markets, but the Fed will also create guarantees for foreign markets ballast to maintain stability of US markets, it is necessary. We can include limits the spread of people to stop and try to stem the tide of the virus; We are not able to stop the flow of capital, collapse without bringing the entire world system. The understandable Fed also before Congress that the health crisis of the pandemic and the consequent caused by the orders refuge-in-would easily turn into a financial crisis, economic crisis and the formwork companies, travel and events, the size may be greater than that, what happened in 2008-2009. What it does now is not caused the same as “the guarantor banks” such outrage in the last crisis. E ‘rather to “Save it all” with the knowledge that we have just created a half intact as a health crisis, but a financial crisis of the above might be too much to handle a severe recession. Just as the human body can maintain the same organ failure only a limited number, the company can withstand only a few simultaneous systemic shocks. If the financial system – the conduit for payments, cash, payroll and soon this government will be paid refund checks – would crash now, then it might really the prospect briefly feared the fall of 2008, that ATM should work monetary and financial system could implode. What comes after this period of Fed intervention it is yet to be seen. But what it spells for the coming months is a particular situation in the financial markets – equities, bonds, 401Ks, college savings, health savings accounts, pension plans – all bruised but look decent even if the underlying real economy looks terrible; a situation where the stock market is bad, but not disastrous year, while job losses mount temporarily tens of millions are vulnerable small businesses and the weakest of the leading companies in danger of going bankrupt. They may, as we have already started the past two weeks, have a large gap between the financial markets and the real world, one that not only companies indirectly benefit, but someone with a retirement plan or any savings invested. The relative stability of the financial markets, however, are staggering contrast to the rapid decline in real economic activity. Next month, the company will begin reporting about reflecting on the sudden jump in activity from mid-March. April will be much worse. Since the actions act based on what investors believe they are the future profits of the company, and that interest rates should reflect how risky the borrower is, the financial world is based trading on what people assume when this abnormal period of blocking passage ends, reinforced by a Federal reserve with an almost unlimited availability to buy and give. In the real world, an institution would be set up to maintain stable the restaurant business, they are also closed during most of the restaurants they would keep the meals and the restaurant cook Fed board would be even if no one was sitting or get something to eat. Because this violates any previous rule, and changing from your previous rule book other than a limited trial after 2008, it is difficult to say if this will end well. The longer the economic crisis, the more difficult will be the Fed back the tide. But what the Fed knows and what we all know is that in the absence of what it does, it probably would be very, very bad. There would be a financial crisis over the 2008-2009 scale are facing to fight millions of jobs shed in an effort with the greatest risk of a pandemic in a century and a real world economy. That would be asking too much any system. We have many problems right now; Thank God, and at least for the moment, is the financial implosion is not one of them.
Picture copyright by Scott Heins-Getty Images