Wednesday, February 19, 2020

The Wuhan Coronavirus as Cover to Bring on an Economic Collapse?

Matt W. emails:
Mr. Wenzel,
Your commentary in the EPJ Daily Alert has been very much on the conservative side with regard to the coronavirus epidemic, with advice in your newsletter leaning towards it being a short-term blip in the overall market. I am a little more concerned that it may turn into something bigger, but even if it doesn’t, I remember the leftist mantra of “never letting a good crisis go to waste.”
Aren’t you concerned at all that the Fed and the establishment might use this as cover for the pin-prick that we all know their bubble will necessitate? Eventually this boom has to bust, and what better excuse than a global pandemic to distract from the machinations of the Fed?
RW response:

I am pretty convinced that Fed members have a pretty shallow understanding, if any at all, of the boom-bust business cycle.

As I pointed out in, The Fed Flunks: My Speech at the New York Federal Reserve Bank, then-Fed Chairman Ben Bernanke had no idea in mid-2008 that a crisis was developing, when to me it was obvious and I said so in real-time. The book also includes my takedown of the Fed economists who claimed in 2005 that the housing market was not in a bubble. They just don't get it with their faulty models.

At the current time, it is doubtful they even know we are in the bubble phase of the business cycle so I doubt they are thinking they need to pin-prick it.

The only thing they are likely aware of is the simplistic view that if they raise interest rates too much they will weaken the economy. Unless they want to make things difficult for President Trump's re-election bid, they are not going to do this---and there is no indication at this time they want to do so.

1 comment:

  1. An old saying true in government as well as any organization: Sh*t rolls downhill (seldom if ever up). I doubt any self preserving FED economist wanting to maintain his/her cushy job in economic, "Never, Never Land", would dare have the courage to forecast something as draconian as a bust cycle. To do so would no doubt get one of these research wizards banished to the FED gulags.