The Dow fell. Driving stocks down was the unprecedented carnage in the oil market. West Texas Intermediate oil was selling for MINUS $39 a barrel. Experts at Bloomberg say the price could fall to MINUS $100.
In theory, if your swimming pool were empty, you might buy a couple truckloads of oil. The average pool will take about 20,000 gallons. That’s nearly 500 barrels of oil.
So if you filled your pool, you’d get paid $19,500. Then you could wait until things get back to “normal”… and sell your oil, say, for $20 a barrel… and pocket another $10,000.
Or you could just learn to like swimming in black goo.
Swamp Stimulus
It’s deflation now… inflation later.
Oil is below zero. Money too. Like oil, in some places you have to pay someone to store it for you.
And as things get crazier and crazier, you may soon be able to buy a house for less than nothing (a negative rent). Then, it is only a matter of time until stocks trade below zero, too.
Tuesday, they were headed in that direction.
Then came the news that the feds had agreed on another bi-partisan SwampFiller program. Bloomberg:
Senate Passes $484 Billion Interim Economic Stimulus Package
At the rate things are going, the money will be gone by the end of next week… comfortably ensconced in the pockets of insiders, chiselers, and cronies coast to coast.
But don’t worry. There’s more where that came from.
There are too many oil companies producing far too much oil. But Donald Trump proposes to lend them more money. The idea is to pay them NOT to produce:
I have instructed the Secretary of Energy and Secretary of the Treasury to formulate a plan which will make funds available so that these very important companies and jobs will be secured long into the future!
And even though the latest bailout has not yet been passed, there’s another already on the way. Here’s Bloomberg again this morning:
The Senate sent a $484 billion package of new pandemic relief funds to the House for likely approval Thursday, as lawmakers and the Trump administration began turning their attention to the next round of stimulus for a stalled U.S. economy.
“We have a great victory for the American people,” House Speaker Nancy Pelosi said after the Senate acted. “But we certainly need to do more.”
The “more” is where the inflation comes in.
It’s one thing to fake out investors with quantitative easing (QE) and fraudulent interest rates. It’s another to dump trillions in helicopter money on what’s left of the Main Street economy.
In the former case, you get higher stock prices. Everybody’s happy. In the latter, you get higher consumer prices. Who’s happy then?
But for now… we’re still in the deflation phase. And yesterday’s news of coming inflation did little to lift stocks. The Dow still settled down 631 points. Only 23,018 left to go!
$10 Trillion Blunder
Meanwhile, research and statistics continue to pile up… hinting that the Trump Administration has made a $10 trillion blunder in its handling of the C-virus.
New studies show that the virus moves faster than expected… infects more people than expected… and kills fewer of them than expected. It acts, well, like a regular virus… not like The Plague.
Typically, a virus gets passed around the schools in winter. Children come home with runny noses. Parents soon have colds, too. Then, when they visit grandparents… the old folks are doomed.
The “old man’s friend” is how they used to describe pneumonia. It came along, just in time, before the old fellow’s condition — mental or physical — became too embarrassing.
In the case of the C-virus, the most reasonable course of action is merely to warn people… and let them take precautions. That is about what Sweden has done.
The U.S. took the more heavy-handed approach — it imposed curfews, shutdowns, and economic stoppages on everybody.
In closing the schools, it prevented children from learning (assuming the schools serve any useful function at all), but it also prevented the children from building up the immunity that will prevent the disease from spreading.
In closing the economy, it prevented people from earning a living, which means it prevented them from earning the “wealth” that we all need to live on.
The result is a man-made economic catastrophe. No one knows how much it will cost — in real output only. But current estimates are running around $10 trillion.
And that’s not counting the economic damage done by the feds’ bailouts and money-printing… or the losses in the asset markets. U.S. stocks alone are down about $5 trillion since early February.
Great American Fraud
Had only the vulnerable old people been locked down, the damage would have been minimal. Old people are mostly retired… or can work from home… It is no great loss if a few Walmart greeters have to stay home.
But the U.S. has lost more young workers than older ones. Here’s a tweet from Ezra Klein:
52% of Americans under the age of 45 have either lost their job, been put on leave, or had their hours dramatically cut as a result of the coronavirus pandemic, compared to 26% of people over the age of 45.
Almost all young people… and the huge majority of people in their 30s, 40s, and 50s… live by the “sweat of their brows.”
That is, they earn money by selling their time.
They make no money when they’re not working. They add no wealth. They learn no skills. Time — their most important asset — has been stolen away. Their lives have been impaired.
Along come the feds and tell them, “No sweat… we’ll give you money.” The Paycheck Protection Program pretends to make them whole by replacing real time with fake money.
A great victory? Nope. Just another fraud.
Regards,
Bill
• This article was originally published by Bonner & Partners. You can learn more about Bill and Bill Bonner’s Diary right here.