Submitted by Taps Coogan on the 4th of March 2020 to The Sounding Line.
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Bleakley Advisory Group CIO, Peter Boockvar, recently spoke with CNBC to warn that the Fed cutting interest rates in response to the Coronavirus outbreak is “a waste” of cuts and will not have a material impact on markets or the economy. Shortly after the interview, the Fed performed a surprise ‘double’ rate cut, slashing the overnight rate by 0.5%. Markets went up for a few minutes before plunging deeply.
Some excerpts from Peter Boockvar:
“A rate cut or two is not a vaccine. It’s not going to address supply issues out of China. It’s not going to make people get back onto a plane or get back into a casino. It’s just not the antidote to what ails us right now. What the antidote is is actually seeing a plateauing of this spread. That’s the answer to this, not some wasted rate cuts… Maybe it will grease the wheals of the financial markets for a short period of time, but I am more worried that they do this, markets rally for a short period of time and then just give it all back and then these cuts are wasted…”
“Central banks right now are going to be shooting blanks. They’re going to give us what they think they can give us, but there is going to be blanks in that gun. I am just warning people…”
The Coronavirus outbreak is either going to get worse, or it is going to get better. If the outbreak gets better, momentary and fiscal policy is far, far too accomodative.
If the outbreak gets significantly worse, monetary policy will be mostly irrelevant and the Fed now only has four quarter rate point cuts left before they hit zero.
A decade of misguided monetary policy has brought us to a point where monetary policy is likely to be destabilizing in pretty much all scenarios.
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