A power play in DC appears to be taking shape regarding the economic response from the Fed and the government in relation to COVID-19. Over the last couple of weeks, the argument between a liquidity crisis and a solvency crisis has been and continues to be discussed. This is likely to be at the crux of this particular DC power play. Because after all, no politician or policymaker wants to be the one holding the bag when all of this comes crumbling down – so, they’re setting the stage for the blame game.
On the one hand, we have the Federal Reserve, where Jay Powell accurately notes that there is a difference between a liquidity and solvency crisis. It is on the liquidity side of the ledger where the Fed can be most “effective.” They can print money and expand the money supply at-will. They can flood the financial system by utilizing a number of lending facilities – and they have. However, this does not solve the solvency crisis that surely awaits us. Here, the Fed Chairman has been stating that he believes Congress and the Administration should take a bigger role through fiscal measures as opposed to relying solely on monetary ones. Here is where the power play or blame game starts to form. The Fed can show via various statistics, such as their balance, that they have thrown trillions of dollars into the system to keep the financial plumbing moving along – in conjunction with other measures. Now, while they claim they still have ammunition, it would be prudent for the government to step in even further, is their argument – the Fed is passing the baton of responsibility. “Hey, we here at the Fed have done our part, look at exhibit, A, B, C, etc… now it’s your turn Uncle Sam.” So now the ball is in the hands of Congress and the Administration – a huge and slow moving political machine – what could possibly go wrong? So, if the solvency crisis does unfold, meaning a considerable amount of businesses, (of all sizes), file bankruptcy and/or liquidate, then a lot of this blame will fall squarely on the shoulders of the government – at least this is what the Fed is trying to position for. Will the Congress and/or Administration allow this to happen?
No one wants to step up and be the leader. No one wants to step up and admit to our many faults as a country, as a society, as individuals. No one wants to speak the harsh truths of the matter with respect to so many subjects. No, no. But what we can do without hesitation, is burden future generations who have nothing to do with this, and have them pay for it with lower living standards, higher costs, and lack of opportunities. All for the purpose of returning things back to “normal.” Normal by the way is insanity personified, and completely unsustainable, but as our podcast highlighted yesterday, Nobody CARES. It will thus be interesting to see how the government handles the solvency crisis and who they seek to blame. It’s a power struggle, it’s a money struggle, it’s a reputation struggle, and it’s a legacy struggle. And on top of it all, it’s a Presidential election year. We told you 2020 was going to be interesting and it’s only May! Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Recession #Debt #Bailouts #USA #EndTheFed #Congress #Liberty #Revolution #Gold #Depression