Its Reporting Time

Now that we are at the end of Q1, 2020, funds have to report and we may hear of many of the losses. A few funds will be significantly up.  A number of institutions sold to mitigate the losses they would have to report – foundations and endowments have the luxury of being able to hold and wait for recovery.  A lot the selling was foreign investors in need of cash – selling got them handy dollars. The Euro rallied in response, but its overall weakness is secular and structural.

I have averred from speculating regarding why the buzz about COVID-19 contagion has been raised to excessive panic levels, but it is interesting that some very high-placed pols in Europe, like here in the states, also somehow knew to fully liquidate their market holdings in January. Dumping Trump and federalizing Europe are two goals that big groups of people have clearly been working on for some time already.  The proposal to issue Eurobonds seems to be in-support of this. The bonds will be issued by the EU, without attribution to the member states. So any more of them that follow Britain and move to break with the accord will not get this subsidy – they have to surrender their sovereignty for it. The ECB will not intervene to support the buying of them, so when they come to market we will get a glimpse of the level of real interest rates in Europe. If that fails, the ECB can just revert to printing money, which it does not have to back by buying up Treasuries, like the Fed does here.

The European banking complex is in bad shape, and is the likely origin of the repo market problems. There is motion to eliminate paper money in-favor of electronic money. The elimination of physical money eliminates the possibility for people to withdraw cash and hoard it This precludes the problem of bank-runs without the any need for the banks to pay their retail clients a reasonable rate of interest rate on their savings. It also allows the governments to tax money every time it moves or finds a new haven. Selling a used lawnmower to a neighbor will no longer happen without the government getting its slice.