The Fed Has Begun Implementing Coronavirus Measures

Two guys enter a bank wearing face masks.

Panic!

Then one guy yells: ‘Don’t worry, this is just a hold-up.’

—Currency joke making the rounds on the internet

We’ve heard of a purple rage…and purple rain…and purple prose.

But never before had we seen purple chickens.

The locals paint the chicks to protect them from hawks.

Purple chicks

We went to visit a farm over the weekend. More about that in a minute…

Ready to act because of the stock market

The stock market managed a bounce yesterday. Whether it was more than that, we will wait to find out.

As expected, major central banks have already said they are ‘ready to act as appropriate.’’ And this morning, an emergency meeting of G7 finance ministers is crafting a coordinated response.

Remember, if you start to cough, don’t bother contacting your regional central banker. He has no antibodies that work against a virus.

As far as we know, no blind person has ever been made to see…nor has any lame person been made to walk…after visiting the Federal Reserve headquarters in the Eccles Building in Washington, D.C.

Nor can central banks replace lost sales, wages, or profits. All they have is fake money. And all they can do is add it to the financial system, in one way or another.

Yesterday, speculators were betting that the Fed would double down on its errors of the last 10 years — cutting rates and buying assets. It delivered on the former earlier today with an emergency rate cut.

But except for the illusion of the ‘wealth effect,’ those measures have done nothing in the past for the real economy, which has simply limped along through the weakest recovery ever recorded.

But they did hand Wall Street some huge (temporary, on-paper) profits. And maybe they will again.

Our bet, nevertheless, is that however much the feds may drive up stock prices, the real value of stocks will go down.

Stocks represent companies. And companies — now bigly overpriced — are likely to be less valuable as the C virus, consumer panic, and inflation do their damage.

A corollary to this guess is that however much new, fake money is introduced to fight the plague, the value of the dollar will fall at least as much.

So, even if stock prices go up in nominal (fake dollar) terms…they will go down in real terms, as they did in the 1970s. Gold will tell the tale.

And your best bet is to find a nice place to wait it out.

Stock problems

We’re still in Nicaragua. On our own, we feel like a bank robber on the lam. Or maybe a disgraced professor of literature from an all-girls school. (What was all the fuss about? She was over 18!)

A stock market crash? A pandemic? A presidential election?

What better place to enjoy them!

We must have the smoothest feet in Christendom. Each day, they are sanded for an hour as we walk along the beach, and then bathed in saltwater. And there, riding seaward on the waves, are the women surfers, singing each to each.

After a quick swim, our housekeeper makes us a big breakfast. The minimum wage here is about $20 per day. So, a half-time maid costs about as much as three café lattes in Baltimore.

And what’s to worry about here? Nicaragua doesn’t need a C virus. Or a stock crash. Or an election. It is already depressed.

The other resorts up and down the coast have almost all closed their doors. We stay open, still paying hundreds of workers, mostly because they would have nowhere to go and nothing else to do.

In the bar…in the restaurant…at the beach…they stand ready to help in any way they can, grateful for their jobs.

As for the farm…We bought it a couple of months ago.

Why? We’d begun raising pigs, cows, chickens, and sheep. We needed a better place to put them. And by law, our woodshop (a key part of the resort) is required to plant 10,000 trees a year (an environmental protection rule). We’ll plant them at the farm!

Besides, the Fed is out to destroy the dollar with inflation. It may take time, but they’ll eventually get the job done. Most likely, it will destroy the economy and the stock market, too.

Ten years from now, we expect to find the dollar worth less than half of what it’s worth today. Stocks too. And bonds? Probably.

But farmland in Nicaragua? Trees? Well, who knows?

Relics of the past

When we first arrived 25 years ago, we were surprised to see ox-drawn carts doing much of the farm work.

‘Look, kids. You’re not likely to see that again in your lifetimes.’

We took photos, sure that these relics of the past would soon disappear. But they are still here. We passed three of them on the short drive to the farm.

We pulled up into the yard, next to the caretaker’s cottage. His wife, a plump woman of about 40, was leaning on a whitewashed fence, along with five or six muchachos. That is what they call young men here.

On the fence, too, were a pair of green parrots pecking at each other. After a few minutes of this, the woman picked them up, one in each hand, and took them back to the house.

The muchachos had brought the horses, with their hard saddles and dangling fringe, intended to keep the flies off.

We mounted up. Our plan was to ride up into the hills to get a better view of the property. At the entrance, there is a wide expanse — maybe 200 acres or so — along the road. Flat.

If we’re able to get enough water, we could grow almost anything. But water is always an issue here. We’re on the West Coast, not the East Coast. We’re in the dry tropics, not the humid tropics. And here…water is precious.

Hunting for dinner

In the back was the land we wanted to see, about 800 acres more of hills and valleys.

The horses were so small…and so bony…we wondered if they would be able to carry us over the hill. And they were so uncomfortable, we would have preferred to walk anyway.

But that is not the way it is done here.

Inspecting the new farm

‘We do this every day,’ explained Angel, the farm manager. ‘We ride up here to keep an eye on the back part of the farm. We don’t want anybody coming on the farm. They’ll start fires to scare out the iguanas.’

‘Why would they do that?’ we wondered.

‘Oh…they’re just hunting them…for dinner…’

So you see, Dear Reader…pandemic…depression…crash…social upheaval…inflation…Sanders in the White House…Trump in the White House…

Whatever comes…at least here we’ll have something to eat.

Regards,

Bill Bonner