So basically deflationary forces were greater than the inflationary force of massive deficit spending?
Well, the question is how well their lockdown works given that it’s less restrictive than China’s. In other words, do they get below capacity? Or are they flattening the exponential growth curve but still growing linearly at a rate that keeps them above ICU capacity.
The answer to that question will go a long way to telling us how accurate various models are and whether we can open things up enough to keep the economy functioning.
The deficit spending was only part of it. Discount rate at zero, massive quantitative easing. All inflationary and still not enough to consistently get inflation up to the Fed’s target.
I felt like dow @ 20k was where the big resistance would be felt. Now that we’ve crashed through it, there may be no bottom.
They’re pretty restrictive. More than us right now. I think the only way you get linear growth in this thing is if your R # is slowly declining at just the perfect rate. IE - you’re pretty much always either in some exponential increase or decay unless you’re at perfect flatline R1. But I haven’t dug deeply into that so I could be off.
Yeah I looked at these earlier via the TIP etf and I’m stunned they’re getting hammered, although they’re up a bit today.
Well, today I learned that it’s impossible to know, so there’s that. I can handle a risk of 10-15% inflation, so I think I should relax about it. If it got up to some crazy numbers, I’d basically be totally fucked coming from a pretty good position to weather this.
If the market loses the same percentage that it did in 08, then the dow jones sits at 13000.
Right, but they’re less restrictive than China. Like essentially, there’s an R0 that each country will find acceptable, and it’s ~ the one in which they stay below ICU bed capacity. We don’t know what that R0 is, and we don’t know how each level of lockdown will impact it. It will also vary by country based on the number of ICU beds per capita.
Right now the world is basically doing guess and check, based on the best estimates of experts
With that said, if we arbitrarily call a China lockdown 100% and the Italy lockdown 75%, and ours 60%… We currently know 100% works, we don’t know if 75% works, thus we don’t know if 60% can work. If we at least know 75% works, that’s a good indicator and provides some hope. Once we know 60% works, there’s a chance 50% works, etc, and we can start to open up the economy a bit more.
Inflation of 10-15% would be bigly disruptive imo. Especially when that’s so far from the current expectations.
Good news, I suppose, is that there have to be some extremely cheap inflation hedges available with options on 30 year bonds if you’re actually concerned about inflation.
Trump CEO parade about to start. Dow will break 20k, thank you, spend your money wisely.
Old adage about this. You can be right but the market will remain irrational longer than you can stay solvent
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Debt defaults like we had everywhere in 2008 are inherently deflationary due to the nature of fractional reserve banking. So this scenario is a little different than a housing crisis where everyone defaults on their mortgage, but yeah with the price of gold dropping this is not the time to worry about inflation. The Fed printing three trillion dollars and using it to buy a bond with 0% interest that only comes due in 100 years would barely move the needle in my opinion.
Supply shocks due to business closures will impact prices more than currency inflation
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Blue Apron was $2 on Monday
now $19
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A stock market shutdown is a horrible idea. It would increase the panic instead of decreasing it.
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Probably right. This is a relatively small amount of money I would probably be gambling on March Madness right now anyways so if it doesn’t work out it’s all good.
I think the biggest variable is are we doing enough now to stop household cluster spread? Italy is a dense country. If they stop household cluster spread in Milan and Bergamo, that’s a good sign imo.
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If you’re actively betting against it in a boom or betting the rent money in a bust.
The fact that finance goons are the ones calling for it tells you everything you need to know