I change my mind. After the stock market crashed thanks to Trump cutting money out of the CDC, him trying to downplay the deadly, less than 5% mortality rate even almost to the point of calling it a hoax, and firing anybody who doesn’t agree with him on the issue, I am officially desperate enough to vote for Michael or Pete instead of hoping that voting green would work for once if it somehow came to that just to get Trump out!
I mean, they may be racist, and hypocritical, but there’s no way they can be any worse when it comes to a pandemic, right? Like, they would probably just go with whatever suggestions come to them to keep people from dying or something, from somebody who knows what they’re doing?
Well, they can’t be worse than Trump at this point at least. Nobody could be. My rabbit’s probably smarter than Trump. She at least understands simple commands like “stop doing that” and “don’t eat that.” That’s more than Trump can do at least.
Today, Donald Trump went to North Charleston, South Carolina, to have another rally. It’s going to be a really BIG rally, and Trump said it’s going to be very exciting. Meanwhile, Mike Pence is busy with coronavirus. He was in Florida today, and he assured that the government will remain transparent with the American public as they work to protect their health and well-being. Trump and some others, like
John “Mick” Mulvaney, the acting White House Chief of Staff,
have accused the fake news media of trying to politicise and exaggerate the situation in order to hurt Trump. Mulvaney even said that what he might do to calm the declining markets is to turn the television off for 24 hours. Trump also congratulated and thanked Pence and all the professionals today for doing such a fine job on the coronavirus situation…
The United States will invoke a federal defense law to boost production of masks, gloves, gowns and other items to protect against the new coronavirus, the Trump administration said, as a new case of unknown origin was confirmed in California on Friday.
Trump: Coronavirus – which has now killed 2,800 and infected more than 80,000 – is the Democrats’ “new hoax.” - [ https://www.cnbc.com/2020/02/28/trump-says-the-coronavirus-is-the-democrats-new-hoax.html ]
YOUNG PRESIDENTAL CANDIDATES 2020. | AMERICAN BOY©️
No More Checks and Balances: A federal appeals court just effectively ruled that the Executive Branch is free to ignore Congressional subpoenas. - [ https://www.cnbc.com/2020/02/28/appeals-court-say-trump-lawyer-mcgahn-doesnt-have-to-testify-to-house.html ]
Our Libertarian-leaning friend Kelly Blades joins the Dynamic Trio as they discuss which Bernie can beat Donald Trump; The Fidel-loving Bernie as portrayed by both Trump and centrist Democrats or the Populist Bernie, who has laid claim to the youth wing of the Democratic Party?
What was it that conservatives like to say? “Facts don’t care about your feelings?” And yet their leader is trying to change the facts because his feelings are hurt.
‘Imagine the towers we could build if we remembered Babel;
imagine if we were not working with bloody bricks,
if we were building bridges to each other
instead of towers to uncertain heavens and hells
humankind was not supposed to reach.
In rolling tongues like rolling rivers,
and spoken consonants like falling rain,
the different oceans across the earth wi
all say love, all say hope, all say love again.
Teach me all the water you know; you can drink from mine-
and from the springs our mouths can speak
will come cornucopias from which to dine.’
'speak,’ - Megan’s Poetry #797
Stocks Plunge in Worst Week Since 2008: Live Coverage https://nyti.ms/2Vw6afC
STOCKS PLUNGE IN WORST WEEK SINCE 2008: LIVE COVERAGE
Published February 28, 2020 | New York Times | Posted February 28, 2020 |
Treasury bond yields have fallen to new lows.
HERE’S WHAT YOU NEED TO KNOW:
MARKETS ARE SLIDING AMID CORONAVIRUS FEARS.
Shares in the United States tumbled for a seventh day on Friday, following a 4.4 percent nose-dive in the S&P 500 on Thursday, the worst day for American shares since 2011.
It followed slides in Asia and Europe, as the spreading coronavirus continued to concern investors.
The S&P 500 index dropped about 2 percent by midday on Friday. Before trading began, the index was already down 12 percent from a record high reached just last week, and the drop has put the index on track for its worst week since the 2008 financial crisis.
Yields on government bonds, a measure of investor sentiment about the outlook for the economy, also tumbled.
The sell-off is fueled mostly by worry that measures to contain the virus would hamper corporate profits and economic growth, and fears that the outbreak could get worse. The selling has in a matter of days dragged stock benchmarks around the world into a correction — a drop of 10 percent or more that is taken as a measure of extreme pessimism.
In Europe, the FTSE 100 in Britain fell more than 3 percent and the DAX in Germany fell more than 4 percent. In Asia, the Nikkei 225 in Japan closed down 3.7 percent, the KOSPI in South Korea dropped 3.3 percent and the Shanghai Composite in China dropped 3.7 percent.
LARRY KUDLOW SAYS THE OUTBREAK WON’T DO LONG-TERM DAMAGE TO THE ECONOMY.
Larry Kudlow, the director of the White House’s National Economic Council, said on Friday that the United States economy was “fundamentally sound” and that he did not expect that the coronavirus outbreak would do long-term damage to the economy even if more cases emerged.
“It looks like we will weather this,” Mr. Kudlow said on the Fox Business Network. “This is not going to last forever.”
Mr. Kudlow said that the White House believed that the risk of something “very bad” happening in the United States was low and he advised long-term investors to consider buying stocks on the basis that they are a relative bargain compared to a week ago.
“I don’t think people should panic,” said Mr. Kudlow, who used to dole out financial advice as a commentator on CNBC.
Speaking to reporters at the White House, Mr. Kudlow said that he had not seen evidence of “major supply chain disruptions” in regional Federal Reserve reports and that he believed the recent run on stocks was more the result of market psychology than facts on the ground.
[WHITE HOUSE RESPONSE:The White House chief of staff plays down the risks of the virus. SEE BELOW]
OIL PRICES ARE SHARPLY LOWER.
That means some relief at the pump for motorists this weekend. The national average price of regular gasoline has dropped two cents in the last week, to $2.45 a gallon, according to AAA. One half of that drop came from Thursday to Friday, suggesting the price decline is accelerating.
The nation has 256.4 million barrels of gasoline in stock, 1.4 million barrels more than last year. But the big drop in global oil prices is a much more important factor. At about $45 a barrel on noon Friday, the American benchmark oil price is at its lowest level since December 2018.
Oil producers are nervous since the break-even price for many wells in U.S. shale fields is about $45. So far, though, energy executives in West Texas report that they have made no major changes to drilling activities because of the coronavirus outbreak and its economic fallout. Officials also say there have experienced no disruptions in supplies of materials and equipment.
THE FED OPENS THE DOOR TO INTEREST RATE CUTS.
Federal Reserve officials on Friday began to signal a willingness to cut interest rates if the outbreak worsens, laying out a scenario in which the central bank might respond as infections and quarantines spread globally.
“Further policy rate cuts are a possibility if a global pandemic actually develops with health effects approaching the scale of ordinary influenza, but this is not the baseline case at this time,” James Bullard, president of the Federal Reserve Bank of St. Louis, said in prepared remarks on Friday.
His statement is far from a signal that the Fed will cut interest rates at its mid-March meeting, but it does lay out what the path toward a response would look like. Expectations have skyrocketed that the central bank will slash borrowing costs next month to cushion the economy.
[ CENTRAL BANK CUTS: The Fed is weighing a response to the virus. SEE BELOW]
TREASURY BOND YIELDS HAVE FALLEN TO NEW LOWS.
The development with the most profound signal about the future of the global economy has not been the steep drop in the stock market over the last week. Instead, it’s what has been happening in the bond markets.
Global interest rates are plunging. The yield on the benchmark 10-year United States Treasury bonds fell to a record low of 1.16 percent in trading Friday morning, down from 1.9 percent at the start of the year and 2.7 percent one year ago. From Japan to Germany to Australia, every other major economy is experiencing a similar shift.
The bond market — which does not dominate the headlines but is much bigger than the global stock market — has been growing rapidly in value. It is not merely reacting to the coronavirus; it is reflecting a perception that the global economy was vulnerable long before the disease emerged, because financial markets have never fully recovered from the last financial crisis.
[ BAD OMEN: Low interest rates mean there is little room to maneuver. SEE BELOW]
ECONOMISTS ARE SLASHING GROWTH ESTIMATES.
Forecasters have cut their estimates of economic growth in the United States and around the world this year out of fear of effects from the coronavirus.
The projections vary widely, because economists are struggling to predict the spread of the virus and the resulting damage to growth. Bank of America researchers reduced their forecast for 2020 growth in the United States by 0.1 percent on Friday, to 1.6 percent overall, in a note titled “Gloom but not doom.” Goldman Sachs researchers also have marked down their forecast by 0.1 percent — with growth lagging in the first half of the year, then rebounding — but they said in a note this week that “the risks are clearly skewed to the downside until the outbreak is contained.”
Many researchers expect the Federal Reserve to quickly — and possibly deeply — cut interest rates in the face of worsening coronavirus news and market sell-offs. But researchers at Nomura warned on Friday that “there is little that monetary policy can do to limit the immediate downside risk for the U.S. economy.”
HAND SANITIZERS ARE SELLING OUT.
On Amazon, popular brands like Purell, Germ-X and even Amazon’s own private-label Solimo were largely unavailable on Friday. What was available was coming from third-party sellers at what appears to be higher prices. For instance, a pack of two 12-fluid-ounce bottles of Purell was being offered on Friday morning by a third-party seller for as much as $49.99.
Amazon did not respond to an email seeking comment about its supply of hand sanitizers and how it handles third-party sellers that may be price gouging customers.
Late Thursday, a spokeswoman for GoJo Industries, a small company based in Akron, Ohio, that claims to have invented Purell in 1988, said in an emailed statement the company had increased production significantly to meet the increased demand for Purell and other products.
The company added that the current levels of demand, while on the higher end of the spectrum, are not unprecedented when compared to past outbreaks, like the SARS epidemic in 2002 and 2003 or even past influenza outbreaks.
INVESTORS ARE AFRAID OF THE ECONOMIC IMPACT.
China, the site of the first cases and one of the world’s largest economies, has ground to a halt as it struggles to contain the infection. Its factory shutdowns and quarantines have disrupted the global supply chain. Companies like Microsoft have warned that this will affect their sales, and Wall Street analysts have begun to factor those warnings into their expectations for profit growth this year.
More countries are reporting outbreaks, with over 83,000 people worldwide in at least 53 countries sickened so far. Hundreds of companies have begun taking measures to try to prevent the illness from afflicting their workers, including restricting travel and asking employees to work from home. All of these could curtail productivity.
Investors are responding by selling stocks, as well as commodities like oil, as they anticipate the coming slump.
“To the degree that consumers change their behavior — so they stop going out to eat, they don’t take the vacation, they cancel the business trip — that consumption, that spending, personal consumption is 68 percent of G.D.P.,” said Scott Clemons, the chief investment strategist at Brown Brothers Harriman.
[LIVE UPDATES: At least 53 countries now have cases of coronavirus. SEE TIMELINE]
THE VIRUS IS REVERBERATING THROUGH GLOBAL BUSINESS.
Over the past few days, companies as varied as United Airlines, Anheuser-BuschInBev, Mastercard and Pfizer have said that the outbreak poses a threat to their 2020 earnings, and the overall effect of the outbreak on global corporations could increase the chance of a broader economic slowdown, analysts say.
Baker McKenzie, the law firm based in Chicago, shut its London office, which houses about 1,000 people, after a potential coronavirus case.
The airline group IAG, which owns British Airways and Iberia, said that it expected earnings to be weaker because of the virus, but it could not give accurate profit guidance for the year because of the uncertainty of the situation.
The Swiss government banned all gatherings of more than 1,000 people at least until March 15, forcing cancellation of the Geneva International Motor Show.
Facebook canceled one of its advertising events, which is attended largely by employees, and its annual F8 conference in California — one of the company’s most anticipated events where it showcases its products and plans for the future to software developers.
Employees at Amazon’s worldwide operations — the company’s largest division, which runs the technology and operations for warehouses, deliveries, Prime membership and physical stores, among other things — were told that they should not travel domestically or internationally “until further notice,” according to emails viewed by The New York Times.
A SHORTAGE OF PHARMACEUTICAL PRODUCTS MADE IN CHINA RAISES CONCERNS.
The U.S. Food and Drug Administration said Thursday evening that a drug maker had notified the agency of a shortage that it said was caused by manufacturing problems at a site in China affected by the coronavirus epidemic.
The agency declined to identify the drug in question, saying that to reveal the product would be disclosing “confidential commercial information.” The F.D.A. said that there were alternatives that could be used by patients, and that it was working with the manufacturer to mitigate the shortage.
Public health experts have been watching closely to see whether a shutdown of pharmaceutical ingredient factories in China because of the coronavirus will lead to shortages. The F.D.A. said this week that it was monitoring about 20 products that were either manufactured in China or that obtained their ingredients solely from China.
AIRLINES ARE CANCELING FLIGHTS AS TRAVELERS STAY HOME INSTEAD.
After suspending service to China and Hong Kong because of declining demand, airlines in the United States have started reducing or eliminating flights to other parts of Asia.
On Friday, United Airlines said it was reducing service in March and April from a handful of U.S. airports to Tokyo, Osaka, Singapore and Seoul. Because of the virus, near-term demand for the trans-Pacific flights is down 75 percent, United said.
Delta said earlier in the week that it was canceling its flights between Seoul and Minneapolis/St. Paul through April and reducing remaining service between the United States and Seoul to 15 flights per week, down from 28.
There has been a 19.3 percent drop in travel bookings by American residents in the five weeks to Feb. 17, the analytics firm ForwardKeys said. The United States is the world’s second-largest outbound market after China, which by early February had seen travel bookings more than halved.
In the Asia Pacific region, bookings collapsed by nearly 88 percent compared with the same period last year, ForwardKeys said.
The Global Business Travel Association said that nearly two-thirds of the members it surveyed had canceled meetings and that most companies in Asia had delayed business trips in the region. “If this turns into a global pandemic, the industry may well lose billions of dollars,” said Scott Solombrino, the group’s chief operating officer and executive director.
Amie Tsang, Matt Phillips, Jack Ewing, Keith Bradsher, Alexandra Stevenson, Alan Rappeport, Katie Thomas, Jim Tankersley, Karen Weise, Clifford Krauss and Julie Creswell contributed reporting.
“Yes, Mr Mulvaney, when I first saw a report in the South China Morning Post in early January, I thought to myself "The Hong Kongers out to get Trump”. And this last weekend I read the report in the Corriere dells Sera describing the situation outside Milan, I thought to myself “Ah, the Italians are in league with the Hong Kongers”. Even the Wall Street Journal has jumped on this media band wagon to get Trump. Or perhaps, Mr Mulvaney, this is a serious global issue that has everyone’s attention. Perhaps it does deserve the attention of the President as well.“ JACKSON, PORTLAND OR
Media Covering Coronavirus to ‘Bring Down the President,’ Mulvaney Claims
The acting White House chief of staff plays down the risks of the virus and criticizes the media for not covering Mr. Trump’s son Barron, something Melania Trump has asked it not to do.
By Annie Karni | Published Feb. 28, 2020Updated 11:14 a.m. ET | New York Times | Posted February 28, 2020 |
OXON HILL, Md. — Mick Mulvaney, the acting White House chief of staff, on Friday blamed the media for exaggerating the seriousness of coronavirus because “they think this will bring down the president, that’s what this is all about.”
Speaking at the Conservative Political Action Conference, an annual gathering of conservative activists, Mr. Mulvaney played down concerns about the virus that is spreading around the globe and panicking investors.
Mr. Mulvaney said the administration took “extraordinary steps four or five weeks ago,” to prevent the spread of the virus when it declared a rare public health emergency and barred entry by most foreign citizens who had recently visited China.
“Why didn’t you hear about it?” Mr. Mulvaney said of travel restrictions that were widely covered in the news media. “What was still going on four or five weeks ago? Impeachment, that’s all the press wanted to talk about.”
The news media has been covering the global spread of coronavirus for months.
But Mr. Mulvaney claimed that the news media was too preoccupied covering impeachment, he said, “because they thought it would bring down the president.”
The media’s focus switched to the coronavirus for the same reason, he continued.
“The reason you’re seeing so much attention to it today is that they think this is going to be the thing that brings down the president,” he added. “That’s what this is all about it.”
Following the president’s lead, Mr. Mulvaney also brushed off concerns over the virus; there have been 60 cases identified in the United States.
“The flu kills people,” he said. “This is not Ebola. It’s not SARS, it’s not MERS. It’s not a death sentence, it’s not the same as the Ebola crisis.”
Mr. Mulvaney also criticized the news media for generally not wanting to portray Mr. Trump in a positive light. But he chose a bizarre example, claiming it refuses to cover what he described as Mr. Trump’s loving relationship with his 13-year-old son, Barron.
He said Mr. Trump is in frequent contact with his youngest son, calling to check in on him and let him know of his whereabouts. But, Mr. Mulvaney said, “the press would never show you that because it doesn’t fit that image of him, the press wants him to be this terrible monster.”
Mr. Mulvaney’s decision to discuss Barron Trump was curious, especially when Melania Trump, the first lady, and senior White House officials have gone to great lengths to make sure he enjoys the privacy afforded to other children of presidents growing up in the uncomfortable spotlight of the White House. The White House press corps has generally agreed to grant Barron Trump the same privacy.
“He’s huge, but he’s still very young,” Mr. Mulvaney said of Barron, who is sometimes seen boarding Air Force One with his parents, but who often departs the plane after his father to avoid being photographed. “He was 10 or something like that when the president was elected.”
Mr. Mulvaney, who was interviewed onstage by Stephen Moore, whose expected nomination by the president to the Federal Reserve Board was withdrawn over concerns about his treatment of women, also asserted that Mr. Trump did not sleep on the overnight plane trip home from India or during the day before his news conference on coronavirus Wednesday night.
“He said, ‘I’ve only got eight years, I’m going to get as much out of it as I can,’” Mr. Mulvaney said.
"For three years Trump has ginned-up fear. Now that it’s real they call it fake news. What they’re trying to do is put out a fire with gasoline.” FOURTEEN14, BOSTON
“I am a molecular virologist. The White House’s decision to filter and "manage” scientific and public health communication about an oncoming outbreak shows how desperate and chaotic this administration is. It also shows that the Trump administration doesn’t care actually about American health (surprise, surprise!). Trump cares only about staving off a recession that will undo his main argument for reelection.“ BRETT, NEW HAVEN CT
"Trump’s job is to manage the crisis as well as it can be managed and to reassure the public. Failiing on both counts, and it’s not because of the media.” LESLIE, UPSTATE NY
“Even after three years of absorbing the trump administration’s behavior, the inward focus on nothing-but-trump within the administration, even as the nation faces a true pandemic crisis, remains staggering.” MITCH, TRINIDAD
“It is extremely dangerous for the Trump administration to downplay the potential effects of the coronavirus outbreak. While the overall death rate may be lower than MERS or EBOLA, 2-3% is high enough to kill thousands of people if there is a widespread outbreak in the US. Data suggests that death rates in older individuals may be significantly higher. The media is not inventing these facts, nor are the media responsible for closing factories in China and elsewhere, disrupting global supply chains. It is frightening (but not surprising) to watch how Trump is downplaying this potential crisis for political gain.” DEE, CINCINNATI
“As Chief of Staff and representative spokesperson for Donald Trump, we’re going to remember you said this Mick Mulvaney, every last word of it. I must assume the White House has “approved “ your messaging. As for the virus, I can only hope your ridiculous and utterly irresponsible downplay of its potential is true. Maybe the NYT should reprint this in the months ahead just to keep us reassured and feeling confident in the gutted health and science departments of our federal government. Who needs them when we have experts like you, Mick Mulvaney to explain it to us? Sorry guy, but the health and welfare of the American people is far greater than the political agenda of the White House. Most people would rather be safe than sorry.” HARRY, BAYPORT NY
“The stock markets rise or fall depends on the collective assessment of all investors, including professional traders. Trump can control public opinion in other areas by lies and distortion. He cannot control the sentiment of money managers across the globe. On top of that, the market had gone straight up for ten years and was going to have a correction at some point. He took full responsibility for the market’s rise during the past three years. Now he wants to blame the media and politicians for the fall. This is going to wear out very quickly.”
“Millions are at risk of infection if this reaches a full pandemic, thousands of elderly and immunocompromised individuals will be at risk of mortality if this reaches a full pandemic. Yet, here we are, one of the most advanced nations in the field of medical research and biotechnology, and the president and his team are making the outbreak about how it could damage Trump PERSONALLY. He’s not outraged because our citizens are at risk for infection, or because this could have a huge effect on world public health, he’s outraged because it’s making him look bad. If that doesn’t tell you where Trump’s loyalties lie, then I don’t know what will. It certainly isn’t with the American people.” J, BOSTON
Mulvaney is right: I was hoping that the Access Hollywood tape would bring down Trump; I was counting on all the cabinet-level scandals (Tom Price, Flynn, Pruitt, Wilbur Ross, Barr, …) would bring him down; I was sure that the Ukrainian fiasco would lead to his impeachment and removal; I hoped that the cuts to healthcare and education coupled with windfalls to the 1% would reduce his support. But I don’t and won’t hope that the Coronavirus will be the thing that brings him down, because for that to happen, lots of innocent people will die. Ms Karni is right too: these complaints that the media are working against Trump are just laughable. The media here in France are just as focused on the virus, and their angle, like that of media around the world, is that this is a pandemic that threatens the citizens of their countries. The stock market has had some tremors related to the virus before this week, but the difference now is that the disease has spread much more widely and threatens many more people and a greater share of the economy. That’s not the media; it is the facts. Mulvaney, Trump and all his other apologists are seeking someone else to blame for the bad news they cannot control. So long as the markets were going up, Trump basked in their levity; now that they are falling, it’s always someone else’s fault. Typical juvenile psychology.“ OCKHAM9, NORMAN OK
Fed Chair Issues Statement, Keeping Cut On Table as Virus Risks Roil Markets
Federal Reserve officials are watching markets as coronavirus risks spook investors, and say they will ‘act as appropriate’
By Jeanna Smialek | Published Feb. 28, 2020 Updated 2:30 p.m. ET | New York Times | Posted February 28, 2020 |
Federal Reserve Chair Jerome H. Powell, in an attempt to soothe jittery investors, issued a short statement Friday afternoon reaffirming that the central bank will use its tools and “act as appropriate to support the economy.”
While the Fed Chair said that the “fundamentals of the U.S. economy remain strong,” he also noted that “the coronavirus poses evolving risks to economic activity” and said that the Fed “is closely monitoring developments and their implications for the economic outlook.”
Mr. Powell’s statement came after his fellow officials signaled a willingness to cut interest rates if the coronavirus outbreak worsens, laying out a scenario in which the central bank might respond as infections and quarantines spread globally.
“We could cut rates if we got a global pandemic that actually develops with health effects that seem to be approaching the same level as seasonal influenza, but that doesn’t look like the baseline as of today,” James Bullard, president of the Federal Reserve Bank of St. Louis, said during a speech in Florida on Friday. Mr. Bullard does not vote on rate moves this year, but he is one of 17 regional and Washington-based officials who participate in policy discussions.
Mr. Bullard’s statement does not signal that the Fed will definitely cut interest rates at its mid-March meeting, but it lays out the sort of scenario that could prompt a Fed response. As coronavirus cases mount in countries outside of China and fuel worries that the world is staring down a pandemic, expectations that the central bank will slash borrowing costs have skyrocketed.
Investors had entirely priced in a March interest rate cut by Friday morning — a move that was viewed as barely possible just a week ago.
Loretta Mester, president of the Federal Reserve Bank of Cleveland and a monetary policy voter this year, told The New York Times in an interview on Thursday that the Fed should keep its options open. Ms. Mester, who is generally cautious about such moves, initially opposed the Fed’s decision to lower borrowing costs three times last year.
“We always have to come in with open minds about what’s going on with the economy, and every day we’re getting new information, especially with something that’s fast-moving, like this,” Ms. Mester said when asked whether a cut next month was possible.
Explaining the Fed’s calculus, Ms. Mester said officials are trying to gauge whether there will be longer-lasting economic effects from the virus, such as a hit to consumer confidence and demand.
“If people are temporarily staying home, not traveling, not interacting and purchasing things, that could be a short-term hit,” she said. “Or it could develop into something broader — and that’s the kind of calculus you have to do when you’re thinking about monetary policy.”
The comments also reflect a recognition that the virus could worsen, causing its economic drag to morph from a short-term blip to something that more seriously hits consumer confidence and spending.
Coronavirus cases in South Korea, Japan, and Italy are climbing fast. While there have been comparatively few confirmed infections in the United States, public health officials have warned that clusters of infection are likely to appear.
Stock market indexes were down sharply Friday morning, after falling for the previous six straight days. Investors have been pouring into United States government securities as they look for safe investments, pushing prices up and the yields on 10-year Treasuries to record lows.
Mr. Bullard said he is optimistic that the virus could be contained and said the Fed’s three rate cuts last year should help to protect the economy, which is currently growing steadily.
“Markets might be overestimating the probability of a global pandemic,” he told reporters following his speech. “Data seem to suggest that we’ll have a public health response globally that will bring the virus under control.”
But he also declined to rule out a Fed rate cut in March, or even before, should things worsen.
“I wouldn’t want to prejudge the March meeting,” he said. “Obviously the situation is very fluid, and we’re going to want to monitor events right up until the meeting.”
Asked if the Fed would consider an emergency cut before its next meeting, Mr. Bullard said he didn’t “have a sense” of whether that was possible given the situation’s fluidity.
Coronavirus Fears Are Driving Interest Rates Down, a Bad Omen for the Economy
Very low rates mean there is little room to maneuver if economic conditions get worse.
By Neil Irwin | Published Feb. 28, 2020 Updated 11:34 a.m. ET | New York Times | Posted February 28, 2020 |
The development with the most profound signal about the future of the global economy has not been the steep drop in the stock market over the last week. Instead, it’s what has been happening in the bond markets.
Global interest rates are plunging. Partly this reflects the general rush to safe investments that takes place whenever the world economy looks dangerous. But it also reflects expectations that the Federal Reserve and other central banks will cut interest rates or take other action to try to contain the economic damage of coronavirus.
That amounts to a powerful and pessimistic warning about the world economy in years to come. And that warning remains valid even if the economic damage from the coronavirus epidemic turns out to be mild and short-lived.
The yield on the benchmark 10-year United States Treasury bonds fell to a record low of 1.16 percent in trading Friday morning, down from 1.9 percent at the start of the year and 2.7 percent one year ago. From Japan to Germany to Australia, every other major economy is experiencing a similar shift.
Usually longer-term interest rates fall to very low levels only at times of financial panic and recession. But currently, the economy is in sound shape and investors are seeing only the threat of economic disruption rather than the reality.
It is the financial markets’ way of saying that the Fed and other central banks will need to keep rates exceptionally low indefinitely — that the era of cheap money not only isn’t over, but is only beginning. And that leaves the world economy all the more vulnerable if things were to really take a turn for the worse.
“If this is a severe shock, they don’t have the ammunition to deal with it,” said Joseph Gagnon, a senior fellow at the Peterson Institute for International Economics. He has argued that the Fed has the capacity to offset only a mild to moderate recession, given the low level of interest rates even before the latest pandemic fears.
If just the threat of coronavirus is enough to push rates below their lowest levels during the global financial crisis of a decade ago or the Great Depression, that means central banks are likely to find themselves desperately short of ammunition if the virus, or some other future setback, causes real economic disturbance rather than just the fear of it.
Look at it this way: One year ago, the short-term interest rate that the Fed uses to guide the economy was above 2.25 percent. Last summer and fall, as trade wars and a slowing global economy appeared to threaten the American economy, the Fed cut that rate three times, to its current level of just above 1.5 percent. It seemingly worked.
Today, with major negative economic consequences of the coronavirus looking increasingly likely, futures markets indicate that investors expect two or three further interest rate cuts this year.
There’s a debate underway among economists and market watchers over whether such moves are wise.
The Fed’s interest rate tools are poorly suited to protect the economy from shutdowns in production resulting from disease fears. Economists can’t invent a vaccine or slow disease transmission rates. On the other hand, you go to war with the recession-fighting tools you have, not those you might wish to have.
But assuming the central bank indeed cuts interest rates to try to buffer the economy from damage, it would find itself with interest rates of around 1 percent or lower, in an economy that is doing quite well, for the moment at least.
That leaves little room for further stimulus through that conventional tool. Even a mild downturn would mean the Fed would be looking to less conventional tools, including the quantitative easing policies used extensively from 2009 through 2014, and sending more explicit signals about its intention to keep rates low far into the future.
The United States, essentially, would look even more like Japan and Europe, where interest rates have fallen into negative territory and stayed there for years. In Germany, the 10-year government bond yielded negative 0.55 percent Thursday; in Japan it was negative 0.12 percent.
To be clear, conditions are hardly dystopian in Western Europe or Japan. Countries can maintain high living standards and decent job markets even with the low-growth future that Treasury bond rates are implying.
The combination of low interest rates and large-scale deficit spending by the federal government has been enough to keep the United States growing for more than a decade, and has pushed the unemployment rate consistently below 4 percent.
But it raises a crucial question: If it took all this to achieve that continued growth, what would it take to deal with an actual economic crisis? The latest news developments around coronavirus, and the bond market moves in response, suggest we’re about to find out.
Made an amusing Trump compilation although I’m sure YouTube will take it down pretty fast.