“This is not a financial crisis” — President Donald Trump
There is no systemic risk” — Goldman Sachs
"This is not a financial crisis"
The Corona Virus has taken global economies by surprise. While it started out as a health crisis, it has taken out the tide on the financial markets, revealing just how much risky and levered financial practices have been going on.
Everybody seemed to be drinking from the same cool aid over the past decade. Corporates have been spending all their free cash flow on stock buy backs.
Hedge funds and market making funds have taken on more leverage to squeeze out profit on small moves only to get blown out when COVID19 hit.
Rates will go negative this cycle to stimulate growth.
ORDER OF EVENTS THAT HAVE UNFOLDED
For the past decade, volatility has been at all time lows with the vix not breaking the 30 mark.
FUTURE POTENTIAL KNOCK ON EFFECTS
Pensions default on liabilities
THE ONLY CHOICE, is to bail out pension funds with mass amounts of QE.
People keep saying the fed didn't raise rates early enough and now they have no where to bring rates down and thus they are out of bullets. What people are missing is willingness for fed to go to negative rates (and your commercial banks to charge you to keep deposits there) in very dire times.
When people are forced to spend money but are still fearful of the future they look for stores of value that will hold their value or appreciate against cash over time.
There are only a few options.
MMT will look very attractive in the face of a pension crisis
There are no atheists in a foxhole = there are no free market capitalists in a financial crisis.
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“The Tipping Point of Crypto Finance will be a Black Swan Event.”
In 2015, I wrote that the tipping point of crypto finance would be a black swan event. COVID19 may just be that tipping point.
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