The Monetary Consequences of COVID-19

It may have created a "new normal"… August 25, 2020 UNSUBSCRIBE | ARCHIVES Urgent update for any investor in the markets… Every time a Wall Street algorithm makes a mistake, you have the opportunity to profit. (Hint: It happens more often than you think.) This is your chance to level the playing field… No matter what the overall market is doing. I’ve created a brand-new trading system to help you get there. Click here for all the details. The Monetary Consequences of COVID-19 Dear Money & Crisis Reader, Yesterday, I outlined why central banks were unable to create inflation from 2008-2016, despite cutting interest rates over 650 times and printing over $12 trillion in new money. As a brief review, the reason why none of these policies ignited inflation was because very little of this money made its way into the economy. Put another way, banks were not lending this money into the economy. Instead they were using it for financial speculation in stocks and other asset classes. Policymakers’ response to the COVID-19 pandemic, however, has been a whole other ballgame. First and foremost, central banks have been MUCH more aggressive with their money printing. As I mentioned, between 2008 and 2016, central banks printed $12 trillion. More than HALF of this ($7 trillion) has come in the last six months. Throw in stimulus programs from governments and the number balloons over $15 TRILLION. Put another way, it previously took policymakers EIGHT years to spend $12 trillion. They’ve already committed to spending MORE than this in less than SIX months. Also, and this is key… between stimulus payments and central bank lending facilities directly to small businesses/Main Street, much of this money is actually going straight into the economy. In the U.S., we’ve already seen one stimulus program of $3 trillion. The government is now in talks for a second stimulus program of $1 trillion. On top of this, the Fed has put over $1.6 TRILLION in actual real money into the U.S. economy in the form of credit facilities. Add that up are you’re talking about $5+ trillion in new money entering the economy this year. The U.S. Dollar Is Falling for a Reason Let’s put this into perspective. The U.S. economy is roughly $22 trillion in size. So, in the span of six months, policymakers are planning to funnel an amount of money equal to nearly 25% of U.S. GDP directly into the economy (right now the number is $4.6 trillion, but it will hit $5.6 trillion with the next Stimulus Bill). THAT’s how you get inflation. And it’s the reason the $USD is dropping like a brick. The $USD has lost 4% of its value thus far this year. However, that number is somewhat misleading since the $USD spiked during the March COVID-19 crisis. In reality, peak to trough, the $USD is down a whopping 12%. What’s particularly important to note is that the $USD continues to plunge week after week. Aside from the occasional consolidation period, the trend is decidedly DOWN. In this big picture, the greenback is rapidly approaching the bottom of the range that has determined price action for the last FIVE years. I believe we could very well see the $USD break below the 2018 lows sometime in the next 12 months.  Why? The Plot Against Trump (and Why It Will Fail) They’ve tried to suggest he’s in Putin’s pocket... They’ve tried to impeach him on the weakest grounds… And they’ve even tried to pin a global pandemic on him. But, one of the most sought-after financial analysts in the world is more convinced than ever that Trump will win a second term, despite the witch hunt in the media. And when he does it could send one specific stock shooting up. Find out why and how you could take advantage by clicking here.  COVID-19’s Effects on Fiscal and Monetary Policy The reason is because the government and the Fed will HAVE to keep stimulating the economy. Regardless of how serious the actual COVID-19 situation is (I’ve outlined my thoughts on this issue several times before on these pages), policymakers are acting as if it’s a permanent gamechanger. My contacts in the conference industry tell me that all exhibitions and conferences they are planning will be virtual throughout the first half of 2021. This means no in-person meetings for at least another year. Large corporations, including Google, Facebook, Zillow, Twitter, Microsoft, Square and Uber have told employees to plan on working from home through the end of the year, if not through mid-2021. Schools and universities, ranging from Michigan State to the University of Kentucky, Oklahoma State, and the University of North Carolina, are moving to hybrid learning (a mix of in person and remote learning) or even going 100% remote for their 2020 Fall schedules. Simply put, the world is acting as if COVID-19 is a semi-permanent, if not permanent, game changer for business. This means that unemployment and other economic issues will remain in play for much longer than most realize. Indeed, the Fed has already stated it believes that the recovery won’t be complete until the end of 2021 if not later. Add it all up, and the government will have to continue providing stimulus, which in turn means printing more money and funneling it into the economy. This could unleash a true inflationary storm. I’ll outline which investments to focus on during in this environment tomorrow. Until then… Best Regards, Graham Summers Editor, Money & Crisis The Most Shocking Announcement Of 2020? Apple has changed the world time and time again… With the iPod, they changed how we listen to music. With the iPad, they changed how we use computers. With the iPhone, they changed how we interact with each other. And now, it looks as if Apple could change the world again. What Apple’s planning next could be bigger than anything they’ve done before… It could be the next great leap in technology. And it’s set to make some savvy early investors very wealthy… Will you be one of them? Or will you sit on the sidelines yet again? Click here for this urgent prediction. To end your Money & Crisis e-mail subscription and associated external offers sent from Money & Crisis, click here to unsubscribe. If you are having trouble receiving your Money & Crisis subscription, you can ensure its arrival in your mailbox by whitelisting Money & Crisis. Money & Crisis is committed to protecting and respecting your privacy. Please read our Privacy Statement. Phoenix Press, a division of Laissez Faire Books, LLC. 808 Saint Paul Street, Baltimore MD 21202. Nothing in this e-mail should be considered personalized financial advice. 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