One Crisis Is Manageable. Five Might Not Be


World War One was the most destructive conflict in human history. But before it ended, the Spanish flu came along and claimed an even greater number of victims.

A decade later the Great Depression bankrupted millions. But before our grandparents could dig their way out, World War II dragged them into something even worse.

Why bring up these past examples of multi-part crises? Because the universe seems to like them. And we seem to be entering another one.

Though it’s been largely forgotten in all the recent turmoil, the US financial system was already in crisis last year, as the repo market – where banks lend money to each other – locked up, forcing the Fed to reinstitute quantitative easing. The following chart screams “emergency!”.

Then came the pandemic, which sent the global economy into freefall. The Atlanta Fed’s GDPNow reading currently shows the US contracting at an annual rate of over 45%.

Then riots – initiated by the latest police brutality video but sustained by the frustration of a three-month lockdown in which millions lost their livelihoods while under house arrest — erupted in US cities. Now fully reopening the economy is both more complicated and a lot less certain.

Too much of a bad thing
One of these problems would have been manageable (note in retrospect how smoothly the Fed handled the repo thing in late 2019). Two would have been tougher but doable, with the right combination of focus and humility. Three at the same time might test the system’s tolerance.

So here we are. The Fed can’t print new small businesses once the existing ones die. The police can’t stop riots without shooting the rioters. Corporate profits are cratering with no obvious path to recovery. Stock markets are up, but only because financial asset prices are the sole part of the current mess that monetary policy can influence.

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Most Americans are no doubt praying that this is it for a while because really, our plate is more than full and we don’t deserve any more abuse. But the universe, don’t forget, has a nasty sense of humor. So it might have a few more surprises up its sleeve. Consider:

Indian and Chinese troops are pouring into a disputed border region and are now apparently killing each other in hand-to-hand combat. Why? One plausible explanation is that China views the US and India (along with Hong Kong and Taiwan) as hobbled by the pandemic and therefore less able than usual to defend their interests, and is taking the opportunity to settle some scores.

This might be an issue for the US because 1) China and India are nuclear powers, and 2) the neocon psychos who still wield influence in the US deep state have never seen a foreign conflict they didn’t want to exploit. Watch them demand that we get involved.

But wait, there’s more. China vs India is the most newsworthy current conflict, but not the only one. See Rumors Of Wars: China, India, North Korea, South Korea, Israel And Turkey All Move Toward War.

And last but not least, the US is now entering its hurricane/wildfire season, which raises the prospect of mass-evacuations during a pandemic:

Hurricane season combined with COVID-19 pandemic could create perfect storm

( – When extreme climate conditions interact with stressors to social systems, such as the COVID-19 pandemic, the consequences could be severe.

The authors focused on four main sectors—food, water, health and infrastructure—where connected extremes often lead to unforeseen impacts.

A present example could be the COVID-19 pandemic and the current hurricane season, says Thomas Wahl, an assistant professor in UCF’s Department of Civil, Environmental and Construction Engineering.

“The COVID-19 crisis will very likely increase the impacts associated with the climatic extreme events that will inevitably occur somewhere across the globe over the next weeks or months or already have occurred,” Wahl says.

“For example, shelters cannot operate at full capacity, health care systems are already under pressure, and emergency funds are depleted.”

Imagine the West Coast battling monster fires like last year’s while a Cat-5 hurricane bears down on Miami — at a time when pandemic, depression, and civil unrest still rage. And toss in a presidential election just for fun. The result will be more complicated than even the past few months.

Now, a reasonable response to this seeming obsession with future threats would be to quote the Biblical verse “Sufficient unto the day is the evil thereof” and then go back to focusing on health, safety, and peace.

But this is a financial site and a flock of black swans still on approach vector has investment implications. Put simply, how can anyone be buying growth stocks and ignoring gold in this world?


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