Monday, April 6, 2020

Federal Reserve to Monetize Small Business Administration's Paycheck Protection Program

There it is, another mad money pump from the Federal Reserve Board.

The Federal Reserve just released this press notice:
To facilitate lending to small businesses via the Small Business Administration's Paycheck Protection Program (PPP), the Federal Reserve will establish a facility to provide term financing backed by PPP loans. Additional details will be announced this week.
In other words, the Fed is going to monetize (READ: Buy with money printed out of thin air) part, if not all, of the $350 billion Small Business Administration's Paycheck Protection Program loans that are made.

I am warning my subscribers to the EPJ Daily Alert that we are headed to strong acceleration in price inflation on the other side of the COVID-19 panic---though it might not show up immediately in government price indexes because there will be discounting done by cruise lines and other sectors where people won't want to buy. The price inflation is only going to be in the things we are buying!



  1. Once again you're making several assumptions:
    1) That Demand is static. (People taste and preferences are constantly influx...this pandemic may change people's shopping patterns.
    2) The PPP will strictly be used on payroll.
    3) Millions have lost jobs they aren't necessarily going to be buying cars and computers with that check. (Please see #1)

    For 2 you forget that in order to receive this payroll money you have to PROVE that YOUR job was effected by the shutdown. I don't see how this is necessarily inflationary in the sense that it's all a wash...these people would have received this money anyway directly from their jobs...except they are not doing so because the rest of us are not going out and spending on restaurants or bars.

    Real inflation doesn't come from comes because of banks and fractional reserve banking.

    1. You must be new. Welcome.

      I don't think Mr. Wenzel's demand for menservants would be described as static ( It's the darn market that won't clear at his price. We can all come up with more demand, it's pretty easy.

      You must not have read the PPP info sheet that the Treasury put out. Payroll, benefits, rent, and utilities are all approved business spending.

      What the hell do people buy with money, after meeting their basic needs? Oh yeah, other stuff like cars, computers,... whatever their near infinite demand can reconcile with their pocketbook and the market's prices.

      Do you track M2 money supply growth, via the weekly H6 release? There's been a sizable bump in growth the past two weeks. That "real inflation" you're talking about. You might want to subscribe to the EPJ Daily Alert.

  2. Hi Bradley,

    I'll try again. Suppose YOU Bradley worked as a waiter, or landlord collecting rent, or the phone company, or utility company and before the shutdown you earned X dollars. For example sake lets say $5. After the shutdown you now earned $0 dollars. And after this PPP was passed by government what do you think you'll earn total?

    Hint: It won't be $10. Like I mentioned...the money that is being handed down to to businesses to then pass on to the utility companies, payroll, to pay for what THEY WOULD HAVE TO PAY FOR prior to the shutdown, thus like I said it is a WASH.

    PEOPLE have infinite demand. I can demand a ferrari...but if I don't have a JOB to pay for a Ferrari much, less just lost it..and unsure of the FUTURE, I'm not going to run out and buy a ferrari. There is pent up demand for other things beside FOOD...but who says people aren't resorting to purchasing those goods and services from businesses that can provide it now. Last time I checked...Walmart, Costco, Amazon, Best Buy, Target...are still offering other things online besides butter for those that want to BUY other.

    You and Mr. Wenzel besides looking at the M2 forget the otherside of the equation. The DEMAND for money. The demand for MONEY is high right now. why do you think the dollar has exploded...when the demand for the dollar plumets then you have inflation. People DEMAND cash right now because a lot of uncertainty.

    Who's to say that demand will be exactly the SAME for the same old current goods and services PRIOR to the shutdown? YOU...WENZEL? I don't think so. Are people going to RUN out and set the automobile industry on fire after this? Are they going to RUN out because of being cooped up go and travel around?

    There's a FUNDAMENTAL SHIFT happening in what people will/may want after this is all said and done. You have to be 'clueless' to think everything will be hunky dory in July and back to normal.

    Hope this makes sense.