When the Senate unanimously passed a $2 trillion economic rescue plan late last night, it was targeting tens of millions of middle-class American households many of whom had lost their jobs, and whose lives had ground to a halt due to the global coronavirus pandemic and lockdown. It certainly wasn’t targeting Wall Street bankers.
Naturally, the Congressional stimulus plan which is set for House passage tomorrow, received much publicity – after all, some of those trillions in stimulus payments will end up going into the pockets of America’s workers, and while the final amount is a modest $1,200 per month, both Democrats and Republicans – and the President of course – will take full credit for the handout (while blaming each other for the far bigger corporate bailouts that are at the core of the package).
What has received far less coverage is that to fund this plan, the Treasury will have to issue trillions and trillions in new debt, much of which will be quickly monetized by the Fed (whose balance sheet is now $5.5 trillion and exploding), in what is essentially the arrival of helicopter money in the United States. As a result of the ongoing panic among capital markets participants who are scrambling to respond to this tsunami of new debt, there has been a surge in demand for cash and cash-equivalent products, including gold – which as we discussed earlier this week can not be found at virtually any merchant at a price remotely close to spot – and short-term Treasury Bills, those maturing in 3 months or less.
In fact, so intense is the scramble for near-term Bills that they are all now trading with a negative yield all the way to the 3 month mark, and in some cases, further out.
It is this unexpected drop in hundreds of …
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