Make It Rain: Coronavirus Unleashes QE Worldwide - Nathan MacDonald (March 23, 2020)

We live in historic times, which will be remembered for decades to come, if not centuries. It will be studied, documented, and written about extensively for the rest of our lives and beyond.

Our current world leaders will be scrutinized or praised depending on how they handle this unfolding crisis. I don't envy them, for I believe we are truly living in a "damned if you do, damned if you don't" scenario.

Unfortunately, it appears that what I have been writing about for the last few months regarding how the coronavirus crisis would unfold appears to be coming true, but it’s much worse than anyone could have anticipated.

(Chart source, Worldometers)

Being the honorable tin foil hat wearer that I am, I was well ahead of the curve in predicting what would come next, the carnage that it would inflict on our markets, and the way that our governments around the world would react as the crisis spread.

Sadly, it appears that my small group of tin foil hat wearers has ballooned to monstrous proportions, as conspiracy theories abound on social media and even in the Mainstream Media, as people attempt to make sense of what is unfolding, how it happened, and what governments are going to do.

What they do next will determine our economic future for not only the next few years but possibly even the next decade.

And what governments will continue to do—because in their eyes they have no choice—is exactly what they have done over the past week, except more. Much more.

Quantitative easing, the likes of which we have never before seen, will be unleashed around the world. This has already begun, with countries such as Canada, the United Kingdom, the United States, and countless many others unveiling massive stimulus programs to help keep their citizens afloat while the economy grinds to a halt due to self-isolation measures being put in place.

Canada has just unveiled an $82 billion stimulus program, which may not sound like much to Americans, but to an economy the size of Canada, this is monstrous.

The United States, in true Trump fashion, has decided to go big league, with the Senate putting forward a stimulus proposal that is expected to top $1 trillion.

Just like Canada, the U.S. stimulus program is intended to keep its citizens and businesses afloat while the economic pain inflicted by the coronavirus continues to be felt.

Depending on people’s income, this means that U.S. citizens could be directly receiving either a $1200 or $2400 cheque each.

Meanwhile, the Federal Reserve has had to remain directly involved in the repo markets, injecting billions upon billions of dollars as credit starts to freeze and institutions stop lending to each other.

(Chart source, Federal Reserve)

These stimulus programs come as Central Banks slash interest rates across the world, hoping it will help mitigate some of the economic fallout.

Unfortunately, when the Federal Reserve slashed interest rates to 0% earlier this week, Wall Street was still not satisfied. Stocks, although they recovered temporarily, continued their trend lower.

(Chart source, google.com)

Meanwhile, precious metals are beginning to recover as of today after taking a beating earlier in the week due to people liquidating all paper positions. They have posted significant gains at the time of writing.

(Chart source, goldprice.org)

However, what many people aren't aware of was that those losses earlier in the week were largely only in paper positions, as bullion dealers around the world are experiencing massive backlogs and huge premiums due to the monumental demand for PHYSICAL precious metals.

As I've stated many times before, if you don't hold it, you don't own it. Physical is king, and eventually it will completely disconnect from the bogus paper prices, which are highly rehypothecated and thus easily manipulated lower.

Perhaps what we have seen unfold throughout this week, as the physical metals have maintained a premium over the paper prices, is just the start of this decoupling process. Perhaps this crisis is the straw that breaks the camel’s back and allows tangible metals to break free of their paper shackles.

Perhaps. However, I believe that even paper bullion prices will rally and rally hard once sanity begins to return and all the weak hands have flushed out of their positions.

We are living through a period in which the printing presses will be running nonstop, as bailout after bailout is announced, dwarfing the QE that we saw throughout the 2008 crisis, as now individuals as well as businesses will need help remaining afloat.

The question is: for how long? How long will this crisis drag out, and how much of a strain can the system maintain? Hopefully a lot more.

Stay safe. Stay prepared. Batten down the hatches. This crisis is far from over.