The Disintegration of Neoliberalism

This morning market news elbows the coronavirus out of its pole position. The Fed's Sunday rate cut to near zero, as well as a ramped up commitment to quantitative easing (QE), rather than stoking confidence has created panic. According to The New York Times,

Futures on Wall Street dropped almost 5 percent on Monday, following global markets downward, after an extraordinary move by the Federal Reserve aimed at shoring up confidence instead sparked more panic.

Trading in S&P 500 and Dow Jones industrial average futures was halted after their drop triggered a shutdown in trading, signaling a plunge in U.S. markets after the opening bell.

European markets tumbled on Monday, falling more than 6 percent. France’s main stock index briefly fell 10 percent.

Yves Smith's usual gimlet eye in assessing the financial press in on display this morning:

The central banks signaled desperation and lost credibility as well as firepower. And the timing, coming right after Trump said he had the authority to remove the Fed chairman, had the look, whether true or not, of the central bank capitulating to the President’s demands.

What is the point of cutting interest rates when they are so low as to not have a significant impact on funding decisions? Mr. Market has worked out that central bankers are pushing on a string and what the world needs is more demand to replace the massive deflationary shock of many people and businesses suddenly having or facing the high odds of a hit to their incomes. That means massive spending programs. Even Mark Zandi, whose role as a talking head is to put a happy face on distressing data, is in Defcon 1 mode. From the Wall Street Journal:

“The onus is now squarely on the Trump administration and Congress—there’s no other way out,” said Mark Zandi of Moody’s Analytics. The measures so far will help, he said. “But this is a tsunami. They need something that’s three or four times as large.”

[snip]

The slow, too small, and too narrow sought-after responses don’t merely reflect being in a fog of information gaps. The speed and aggressivenesses of the lockdowns, and their drastic impact make the broad outlines all too clear. Our supposed leaders are in a fog of denial. They cannot fathom that so much of what they had come to accept as the normal and proper operation of our system will crumble if radical action isn’t taken soon, yet that very radical action will also result in changes they deem inconceivable, or worse, aesthetically unacceptable.

If you watched the Democratic presidential debate last night you know that both Biden and Sanders basically called for a bailout of everyone.

But what Yves Smith outlines in her post this morning is the rapid disintegration of the entire global neoliberal economic order. A new system will have to be created, not just a temporary bailout.

If we learned anything from the last financial meltdown it's that political leadership cannot see, cannot accept that another world is possible; hence, for the last ten-plus years, we in the West have been frozen in a zombie shuffle.

Now finally the music has stopped at the zombie ball. Zero-percent interest rates and more QE can't paper over the problem this go-round.