Major concerns for global recession, Coronavirus is the black swan

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by juxuj

Jerome Powell has already said that the Fed will agressively combat the next recession. There is forward guidance, quantitative easing and lowering interest rates, something he has adamantly opposed, but has probably already reconsidered, as central banks scramble to form and implement strategy to prevent a massive economic crisis.

It is already looking more and more likely that the Fed will reduce interest rates to zero or near-zero. Increasing repo liquidity would be ineffective given the levels currently already contributed.

Dropping interest rates, however, will have a self-fulfilling affect, leading to global recession.

Full containment or potential cure of the coronavirus will not occur quickly enough, as the numbers of infection and death increase around the world.

With interest rates throughout most of the world being already near or below zero, a major correction seems unavoidable. The panic selling of the past two days adequately reflects the risk the coronavirus has on a global scale.

Coronavirus is the black swan.


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