DOW falls, Fed stomps on the brakes, Companies panic, a Recession is Coming...Must it happen?

The second book of the Phoenix Agenda Trilogy (Kindle.com) is titled The Phoenix Storm. It is the aftermath of the near total global financial meltdown engineered in the first book. It starts with a description of what the private sector and government inactions create for all us "ordinary folks". It is left to the third book to rectify the problem. There's a bit of possible truth as I reread what I wrote at least ten years ago when the first drafts of the second book were being prepared.

The Storm Rises

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They likened it to a storm, but one that might well take down civilizations.?What had started that fateful weekend in October had wreaked havoc with the economic forecasts of just weeks before sending markets down further.?Circuit breakers in stock markets triggered, but these did not stop the bloodbath.?What had started with the failures of the King administration’s handling of the Corona 19 virus, combined with the inability of the Administration and the Democrats to come to a second rescue agreement before more damage was done to the economy,?continued and multiplied ten fold as the combined series of events of that October weekend to wealth, the damage of the Trans-Pacific dock strike to keeping global supply chains filled, and then the debt?moratorium by a majority of the emerging and developing countries to the banks, and the economic indicators were all pointing into depression territories.?The market collapse had been helped along too by the over dependence of financial advisors, pension funds, and individuals on risk protection software, like METIS programmed trading and risk mitigation systems provided.?Overwhelmed by the combination of economic, social, and political events coming together one after another, the risk-reward ratios built into the algorithms triggered massive and sustained selling of shares and bonds and buying of gold futures and stocks.?The result was the collapsed markets of late December and early January.???

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Businesses altered direction, shelving plans for hiring and new investments now that there was a vaccine, and the virus risks were fading.?Risk versus reward ratios changed dramatically, and small, medium, and larger businesses in rich and emerging markets cut employment ahead of the loss of sales. The damage from the pandemic of the earlier months, the August failure to enact continuing unemployment assistance at higher rates, as well as help for State and Local governments, that finally was enacted late in August, had produced a double whammy to the economy.?The impact of months of little or no rent, eviction embargoes without help to landlords to make payments on mortgages, had already crippled the commercial real estate market, so the Masters bankruptcy had send prices of high and low-end real estate into near terminal collapse. Everyone was in a wait and see attitude as the days ticked down towards the next President taking office.???

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The Pacific dock strike made it difficult to keep factories open as long-distance supply chains on which finished products depended collapsed.?Inventories were quickly depleted in stores and factories adding to the downward pressure.?Banks reeled in advance of the losses from sovereign and private debt.??Economic projections of 2021 global economic growth had been optimistic with worldwide growth expected back to over 3%.?The lingering impact of the global pandemic added to tensions in the world.?The Russian-Saudi price war in oil created a negative expectation for commodity prices adding to the recession in the oil sector and sent shock waves through over commodity prices.?Deflationary forces were again at work undermining financial policy strategies for dealing with the oncoming storm of lay-offs and business failures.????

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The IFF ultimatum on debt rescheduling was the final straw for the major money central banks. Capital reserves were insufficient to manage a write-off of the size these debtors demanded.?One result was that major commercial banks stopped lending to new and old customers alike in a vain attempt to rebuild capital reserves as required by the new banking laws that had been enacted to protect against another 2008 financial meltdown.?Business loans, including short-term lending in the trade paper market, dried up and limits on credit card accounts were lowered just as the Christmas buying season began.?All this uncertainty and the shortages of available stocks in the stores meant that the Thanksgiving-Christmas sales were well below previous bad years.?Many smaller retailers went out of business as customers failed to show-up.?

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For the private banks and investment companies, the Masters bankruptcy was the final straw.?The Phoenix conspiracy had tampered with the underlying economic data making these so called “Masters of the Universe” performance far less than stellar.?With the collapse of the CDS’s and the Masters bonds, the commercial real estate market took a nosedive as the Masters assets were auctioned off at below cost driving down commercial rents and drying up new construction.??

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And while all this was happening monetary policy was paralyzed by indecision.?Opposite to what economists would have predicted, Central Bankers in Asia raised base lending rates trying new theories suggesting higher rates suggest confidence in the future to reverse the deflationary effects of collapsing commodities prices and wages. ?With the downward spiral, Central Banks slowed the addition of new reserves fearing throwing good money after unmanageable debt and tightened lending standards and raised reserve requirements for commercial lenders which turned out to be a classic 1930’s formula making the slowdown worse, turning a recession into a depression.????The US Federal Reserve fell under the spell of Vice Chairman Frederick Schurz, an avowed inflation hawk when the Chairman resigned due to illness.?Without a replacement for the last Chairman, Schurz’s abrasive views won the argument as to what the Fed should do, so it, like the Central Bank during the first years, the Hoover years, of the Great Depression, tightened rather than loosened credit in line with the government’s efforts to reduce the growing government fiscal deficit.?According to Schurz it was best to do no harm, so the might, American Central Bank that had acted wisely to stave off a major depression in 2008, remained on the sidelines during the crisis taking a wait and see attitude as if this storm would somehow blow over and the sun would come out.

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By the start of the Kirsten Anderson administration on January 20th, the world economy was in a state of near total collapse.?More than three million American jobs had been lost in the three months between October and December adding to the continuing job loss from the pandemic induced shutdown of the economy adding 5% to the unemployment rate hovering around 15%.?The projections were for more than 5 million more to go within the next quarter alone.?The trillions of stimulus from the pandemic shutdown had ended in December reducing adding to the fiscal drag and it was unlikely that the Congress even with a new President, could find the will to enact anything more than small palliatives.?The virus was gone now, the vaccines had worked well enough, but traditional economic problems now were center stage.?

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The long, staggered, recovery from the pandemic engineered by King’s incompetence had weakened the economies of the world long dependent upon the United States buying almost a trillion dollars more than it sold abroad.???Problems in the US economy were nothing compared to the near collapse in Asia, Africa, and the Middle East. ?Syria was a mess, millions of displaced persons were causing untold damage to neighboring countries, and radical Islam was gaining, not losing strength among the young and the displaced.?Europe remained a basket case with far-right parties blaming it on asylum seekers and new immigrants.?The final straw, so it seemed, was that Russia was amid a full-scale civil war between the more conservatives and the liberals splitting the country East to West just outside of Moscow.?

?The link below offers a free way to get hold of a review copy. Feel free to download it and review it if you can on Amazon or Goodreads or anywhere else.

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