Squeezing Trillions Through Congress
It’s all hands on deck to soften the blow of this novel coronavirus. Central banks, government, and the business community are all pulling in the same direction, a sight to behold.
Republicans and Democrats are debating history-making emergency economic stimulus, the effects of which will be felt for years to come. But the clock is ticking. Senators have “no choice” but to agree on a $2.5 trillion deal soon according to President Trump, but it’s stalled!
The Fed certainly isn’t waiting around. It’s swooped in with a huge care package for troubled investors, extending lines of last-resort credit to businesses on the brink and initiating unlimited ‘quantitative easing.’
The latter measure has stirred up the most conversation on Wall Street!
Quantitative easing means money printing, plain and simple. It makes the stock market go up, usually, because the new money goes into bond-buying. When bonds are bid higher, their yields get squashed down, and that makes stocks look better!
Investors should heed Alan Greenspan’s warning, however, former Chairman of the Federal Reserve. “We can guarantee cash benefits as far out and whatever size you like, but we cannot predict their purchasing power!”
In other words, we can print money until we run out of trees. But we don’t want to be left trading one share of Apple with a trillion-dollar note like in Zimbabwe! This is a crisis, however. Something must be done to cushion markets in free-fall. What say you?
