"Stimulus" is a really poor description that the politicos use. It's more like corporate welfare.
It's not even like - it
is corporate welfare. They aren't even hiding it anymore. What a great time trim the fat and be paid for it.
It makes me sad that this is probably the end for us. With the fed getting into corporate ETFs here shortly there's really no where else to go. The fed has lost control over the market they've rigged since the dropping of the gold standard. Green by any means is the new name.
I see this catalyzing into a depression under the following circumstances:
1. A lack of vaccine causing repeated bouts of shutdowns for many months.
2. New bills passing to create more money to help people.
3. The fed taking on risk in corporate debt (even if its AA+).
I will justify these individually:
(1)
A lack of vaccines and repeated bouts of shutdowns will obviously cause unemployment to spike and stay high. Take a trip to FRED and look at the labor participation rate. Even adjusted seasonally and for non-returners we are rapidly approaching depression era levels of unemployment country wide. Pair this with the fact many people are now incentivized to not work, and are likely willing to take on the legal liability to continue to collect a larger paycheck, I don't foresee a future of working for a lot of people.
Moreover tourist towns like southern California, Las Vegas, etc, and
especially Las Vegas are going to take a decade to recover. Poverty levels will skyrocket as a result of this entire debacle.
(2)
Money spent by congress is not free. Many states are declaring fiscal states of emergency because the coffers have run dry. This will necessarily increase the tax burden on the country for
many decades in order to pay back the government's appetite for fiscal destruction. I could at least agree with a single welfare check run from the government in the middle of an emergency to slow the bleeding. Repeating the same process will prove perilous for the taxpayer. I foresee some combination of country wide spikes in sales and income tax (at both the federal and state level) soon further driving a wedge between the haves-nots and the have-somes (the haves will always be protected in this case).
(3)
I think this is the final horseman. The fed is not in the business of buying private debt. They have levers they can use to control the yield curve in order to influence the market (issuing or buying back bonds, for example). If the fed is in such a state that they are resorting to buying corporates in the private market the country is suddenly going to find itself tied to the performance of companies. "Too big to fail" will be a funny joke when the country find itself 20 years from now issuing massive corporate welfare to save these companies the taxpayer is now on the hook for.
There's no way at this point we will not see a depression within the next year. A final note: the boomers are going to be retiring. This means we will see massive sell offs as pensions and 401ks close out. Housing prices will likely suffer as billions in real estate assets that were reverse mortgaged are now put back on the market.
What we are watching is the death throes of a market and a country being dragged kicking and screaming straight into the pits of hell. A return to value will likely mean the destruction of trillions of dollars. We are all going to suffer. I hope you like the taste of milktoast.
