The Fed is not asleep — open season on asset purchases and more

Here is the press release.  And:

In addition to the steps above, the Federal Reserve expects to announce soon the establishment of a Main Street Business Lending Program to support lending to eligible small-and-medium sized businesses, complementing efforts by the SBA.

Are those last five words Straussian satire?  If so, bravo.

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"A major pharmaceutical company is halting access to an experimental drug used to treat the novel coronavirus in emergencies, it said Sunday.

Amid an “exponential increase” in requests for the drug, called remdesivir, Gilead Sciences said it wanted more of those receiving the antiviral to participate in a clinical trial."

But one can be certain that someone, somewhere, will be able to blame the FDA for this.

How could we not?

With a high level of having no false positive or false negatives, it is hard to imagine anyone in South Korea or Italy or France or Singapore blaming the FDA for anything.

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I blame Trump.

If he tells the world to steal drug patents, the world can be flooded with millions of drug cures real cheap.

Eg, the Hep C cures selling for over $50k cost probably less than a $1000 to manufacture.

And the drug patents bought to prevent competition for drugs taken daily by hundreds of millions to increase prices to 100 times cost of manufacture.

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If someone blamed the FDA for that, then you just ridicule them because they are showing their mood affiliation or just being an idiot.

In a similar vein you are showing your mood affiliation for your "worry" that someone, somewhere "will be able to blame the FDA for this".

Also, you're a retarded troll for making this weird idle thought of yours the first post on a completely unrelated topic. (so maybe this is actually anonymous rather than prior. Two trolls of a feather.)

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To be fair someone somewhere has committed a terrible sin. Didn't you know that the 11th commandment is "thou shalt not criticise a bureaucrat'.

The penance will be a tripling of their budget.

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Never attribute to malice that which is..

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This is anonymous/prior level lack of critical thinking.

Gilead is not the FDA...

You are right, the people restricting patient access to an unproven drug is the manufacturer, without the FDA having anything to do with it.

Almost as if there is some sort of reason why free access to any drug a desperate patient may feel could help is not actually a responsible policy. The idea is also encapsulated in the term efficacy, not that snake oil salesmen have ever been concerned about that word when making a buck.

BRooo, you straight clobbered that strawman Bro. Thank you for being you, you're badass bro.

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The Fed Moves Last (or as the kids are saying these days, Money Printer Go Brrr)

The father of money printing, done responsibly, is Scott Sumner, with his NGDPLT scheme . TC popularized Sumner over the last decade or so and Sumner's gotten traction in the economic sphere, even gotten the attention of the Federal Reserve, which he's visited in St. Louis. As I wrote to Dr. Sumner by private email this morning (I love name dropping), I hope the latest Fed print money proposal goes well and NGDPLT (de facto) works out. It will be interesting, as we live in interesting times as the Chinese say.

There is no such thing as de facto NGDPLT. Unless you establish it over many years, and even then that's much weaker than announcing the policy.

@Anonymous - But, if the expectations fairy is your claim for NGDPLT, then it's completely untestable. If the Fed policy does not work (and so far the US stock market is shrugging it off, market down today), then you can plausibly say NGDPLT was not big enough? But, by that same logic, if the market fails to respond, the Fed can secretly increase purchases of ETFs as well as accept commercial paper to print even more money... so I think in practice your concern is invalid. Note also "de facto" means in practice, not as Sumner ideally wants NGDPLT to be (i.e., with a predictions market).

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The Fed will be buying MBS and Treasuries.

Will FHLMC and FNMA also ramp up their mortgage purchases?

This is going to be, if the press release be believed, the mother of all money printing. Quite possibly the largest in human history. The Fed will not just move the MBS market but also ETFs (recall Japan's central bank already owns more than 50% of all JP ETFs). It will or should nominally move the stock market and the DJ-30 indexes back towards nominal highs, possibly to record highs again. We'll see. And anybody who owns a jumbo CD or three (or 30 or so like in my 1% family) should read the fine print and see if they can break the CD without much penalty. Because break it they might have to do. Can you spell W-E-?-M-A-? ?-E-P-U-B-L-?-C? Can I buy an "I" (for Idiot / Ideal)? Can I buy an "R" (for Retard/Rebound? Time will tell if we're all challenged or if this proposal is ideal for a rebound. It will be interesting (I'm betting on hyperinflation but I wish NGDPLT -de facto, NGDPLTDF, the best of luck).

Confucius say do not realize unrealized losses.

Diversification rules. When (I think that) the markets have bottomed, I'll rebalance big time.

Years ago, my crazy buddy and I (equally crazy) ate a free dinner from an asset management outfit whose schtick was diversification. They touted cash (bank deposits, AAA corporate bonds, UST's), business (stocks) and land (real estate), proportionally. And, rebalance as appropriate.

Gold and real estate are looking good, so far. At the moment, silver is the best buy.

Thank God for small mercies. You don't hate me because you think I'm a one-percenter. I'm a two or three-percenter.

@Dick the Butcher - good post! Diversification is good; load the truck when DJ-30 gets to 15k and again at 10k IMO. I'm actually in the US qualified for Medicare/Medicaid, since I'm income poor. Overseas, I technically own nothing. In the USA, my 1% status comes from my 1% family, who so far have gifted or willed me nothing. I hope you don't hate me for being in the 1%--from the bottom! lol

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Nobody looks more foolish than those who have been expecting hyperinflation. I expect that particular trend to continue.

As usual, you're likely correct.

I'm not certain. It appears the proceeds of the numerous (altogether over $4 trillion) 20-teens Fed QE MBS/UST purchases 'forever' resided on the Fed's BS as excess reserves. Ergo, little inflation.

I don't know what the Fed's BS looks like this week. Can I contract Wuhan Flu from handling/reading this week's Barron's?

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When the Republicans complain about too many bureaucracies, their solution is to add one more.

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Ah but it supports both small AND medium sized businesses. The SBA being the Small Business Administration would be unable to help medium businesses. What's really Straussian is that there is no Big Business Administration but I think we know why that is ::wink wink::

The US Congress is The Big Business Administration.

Hence the ::wink wink:: at the end of the post.

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The Fed wants to get into the same business of the shadow bankers. The concept is not bad, on a permanent basis accounts are selected via risk equalization needed to keep the Fed on top of the stack.

This is really piling on, the Fed was facing a loss of market share continually since 2009, taken from them by technology and shadow banking. In our minds we need to separate the 'Never let a crisis go to waste" from the hunt for medical suppressants. We are actually getting closer to making this a flu like problem then our panic admits, but piling on will not stop, there is an economies of scale for getting everything up to date at one time.

@Matt Young - "The Fed wants to get into the same business of the shadow bankers" - no. You don't get it. Shadow bankers are not lending money now. Fed is about to lend to me, to you, to the small business down the street, to the big business in the city, to the helicopter company (Sikorsky), and --this is the part most people will soon understand, if the press release is to be believed-- to the helicopter *pilot*. The Fed will instruct said pilot to "go drop some money on the crowd of down-and-out people who are slowly infecting themselves over there at that public park". Can you imagine what this will do to the US economy? Prosperity as Ben Cole would say. Unprecedented nominal prosperity. Quite possibly Zim style prosperity (time will tell, it's all a matter of timing and how much money is printed).

Now, dear reader, you too can join Ray in the 1%, except it will be in nominal dollars.

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For what it's worth, hospitals, small practices, and family care doctors are all complaining that they are in a cash crunch.

They canceled elective care in order to clear the decks, and the coronavirus wave has not arrived for most (geographically). Note that "testing" is an expensive operation for them as well.

I can't really comprehend any fiscal or monetary policy that helps with this kind of thing. It's like all we can do is clear up the wreckage. Declare an emergency and give everyone in bankruptcy 0% loans.

My dentist sent out an email saying that they were open for emergencies only, but you know that is a burn rate for his office as well.

If only the U.S. had a system in which all hospitals, small practices, and family care doctors had a straightforward (more or less centralized) interface for billing, and that this centralized point could be given government funds to immediately distribute to keep all of them in business.

Sad, bigly, that only Americans need to imagine something that exists in basically every other modern industrial society.

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I’m going to place my troll hat back on for a moment.

Perhaps the hospitals should follow the suggestions put forth by former presidential candidate Elizabeth Warren. Hospital staff should accept a 40% pay and benefits cut that was behind the math for Ms Warren’s and Mr Sanders’ M4A cost savings.

You may return to your regularly scheduled reading and commenting.

@Slappy McFee - even if your 40% number is right, why should we allow hospitals to determine their fate? Anymore than we should trust lawyers to determine their fate? The trouble with America is there's too many vested interests each lobbying but nobody for the common cause.

I said I was trolling. It’s right there in the first sentence. Geez Ray pay attention. BTW - didn’t you write about a month ago that you would no longer be gracing us with your presence? What happened to that?

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"What is happening now to small businesses could be comparable to mass-extinction events in earth's history, if it continues.

When you decimate an ecosystem, it can take eons for it to recover." - @mims

That's pretty dumb. The people who ran small businesses will presumably not actually die, they'll just have to go do something else for a while, which is not what happens in a mass extinction. A turtle doesn't become a lizard to compensate for lack of turtle food and then go back to being a turtle. He just dies. Thankfully, that's not how economies work.

Come on. Do you know how small business works? How many are sole proprietorships or partnerships tied to personal debt?

"There are over 23 million sole proprietorships currently operating in the United States, making it by far the most popular form of business ownership."

You do know their creditors don't kill them if they don't pay, yes?

Then truly this is the best of all possible worlds.

You don't get it?

Don't get what?

Millions of small businesses are now shuttered, with most fixed costs still due.

What exactly are you telling me, that owners should just "go do something else" while paying leases on property and equipment, and all loans (including those secured by personal property)?

What exactly are you trying to tell me?

@anonymous - Frank Grimes is right, seeing some small businesses here in Greece in trouble, what happens is creditors will dun the paycheck or attempt to collect, with interest, but *generally* there's no foreclosure, so the debts just pile up, uncollected. Generally but not always, sometimes there's a foreclosure and you see some hapless debtor in the street (and in the evening news, so it's kind of rare). With low interest payments hopefully missing a payment won't be a 'big deal' in the USA.

Did you think my comments were just about 2 weeks of this, and then done?

Or can you see worse case scenarios?

For what it's worth my small business friends are trying to get through to their landlords. Guess what? No end to California shut down in sight, and the landlord is not answering the phones.

To be fair, the landlord is probably making calls to his bank about the mortgage, and the bank may not be answering that phone.

So all we have to do is not answer any phone calls for a month. Easier than freezing time.

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As always, check his Twitter “sources.”

“Christopher Mims is a technology columnist at The Wall Street Journal. He was also a producer at Small Mammal, where he helped director John Pavlus produce science videos for Slate, Popular Science, and Nature. He received a bachelor's degree in neuroscience and behavioral biology from Emory University in 2001.”

Yeah. An economist he ain’t.

Does "a technology columnist at The Wall Street Journal" need to have an econ degree to have a sh_tload of contacts in the small business world?

I am old enough to remember when the WSJ was the preferred news source for main Street business.

That was before the WSJ went all-in on open borders and anti-Second Amendment.

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Better idea.
Pas a law, any business harmed by the virus shutdown can defer interest payments for thirty days. Think it over a bit and give the virus hunters a bit more time. Already we have the drugs to suppress this down to a sever flu system. Then we know more about the virus and firms and households can go about their normal business, which was mostly defaulting anyway. The Fed can do 'stimulus' for real-fake, instead of fake-fake.

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This seems like a very prudent move considering the damage caused by the reaction to COVID-19.

I suspect that the Fed will use all of its powers to help repair damage caused by our response, however with each day we are getting closer to when the even the Feds impressive firepowers will be inadequate.

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Which is more valuable:

A trillion dollars in bonds bought by the Fed in the next year, OR

The Fed buying over the past decade a $100 billion in bonds backed by public health capital like

One year bonds to finance buying PPEs which then get sold into the market before they expire, replaced by the Fed buying 20% more bonds to finance buying new PPEs to be held in inventory for a year.

Century bonds backed by building new public health facilities operated by not for profits who serve underserved rural communities, with all parts of these facilities required to be used at least six months of the year. Ideal locations would be places with vacation homes like New England lands region, the Midwest lakes regions.

3 year bonds backed by private inventories of newly manufactured mil spec emergency supplies as defined by the Army which are sold off in the private market to repay the bonds, replaced by the Fed buying 20% more bonds.

With constant Fed bond buying in open markets, larger and larger inventories in the capital needed in emergencies would be created in the US. These inventories sold into the global market would in times of first world health drive health care goods into 3rd world markets.

In times of 1st worlld needs, the Fed would stop buying bonds so capital in inventory is depleted at normal run rate while all manufacturing capacity would supply the surge demand. If the Fed backed inventory of PPEs represents 50% of global annual consumption, the Fed suspending bond buying of PPE inventory bonds, would surge apparent supply by 50% without manufacturing going into 24×7 operation.

No need to require factories in the US as long as inventory is held in the US. And by assigning bond purchases to Fed regions, inventories will be held in larger proportions in the 1900 economic power house States, which have declined with the expansion of the left coast and globalization.

The economic theory pushed by economists for 50 years of capital equals money means the Fed buying bond to fund employment benefits is equivalent to the Fed buying and holding inventories of bonds backed by inventories of medical goods, and facilities.

Ie, paying a worker to not work is the same as providing protective gear to a health care worker.

Ie, the more unemployed workers getting UE benefits, the greater the consumption of PPEs.

Clearly economic theory has devolved into nonsense.

Capital is not money, money is not capital.

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