Authored by Mike Whitney via The Unz Review,
Monday’s 1,000 point bloodbath was followed by Tuesday’s 879 point rout, lobbing 8% off total market value in less than 48 hours. The two-day drubbing has left traders and fund managers in a state of shock. Growing pessimism and uncertainty are pushing markets to the brink of a vicious downward spiral which will lead to heftier margin calls, more liquidations and fire sales, more knock-on pain among blindsided counterparties, and mounting defaults in the oil sector. So far, the Fed has waved off demands that it implement further easing by dramatically slashing rates, but its resistance will not last for long.
As institutional investors pile into risk-free assets and equities continue to swoon, the Fed will be forced to intervene once again this time buying up ETFs and individual shares to prop up inflated values and stop the hemorrhaging. While this latest iteration of QE could slow the selloff, it will forever undermine confidence in free market capitalism. Even so, the scheming miscreants at the Federal Reserve would rather save their own constituents than preserve the system that created the biggest and most prosperous economy on earth. It’s a question of priorities.
On Tuesday, Fed Vice Chair Richard Clarida said in a speech in Washington,
“It is still too soon to even speculate about either the size or the persistence of these effects, or whether they will lead to a material change in the outlook.”
This is just more diversionary jabber. The Fed spent the last 10 years fine-tuning a system that faithfully transfers trillions of dollars to its fatcat friends on Wall Street while the real economy sputters along at an anemic 2 percent. The Fed is certainly not going to throw in the towel now especially when its crooked pals are getting clobbered daily by a pandemic they never saw coming. Despite its vehement denials, the Fed has already settled on a Plan B that will involve a direct market intervention to purchase a set amount of individual shares per month that will be added to its already-bulging balance sheet. If the bloodletting persists throughout the week, we could hear the Fed make some type of announcement as early as Friday.
No one dreamed that a mutant virus could cause this much trouble and, in fact, very few have yet to grasp the long-range implications. The worst part for the markets is the nagging uncertainty. How long will the crisis last and how damaging will it be to the global economy? Will researchers find a cure or will the pandemic spread like wildfire incinerating the flagging economy on the way? No one knows for sure, which is why the only rational option for investors is to take some chits off the table and wait til the storm passes. This, of...