What Will a State of Emergency Usher In?

Safety is important, but not at the expense of rights. Panic during a state of emergency will only worsen the economic effects of the virus, and political action will protract that even more so.

March 16, 2020

By: Bobby Casey, Managing Director GWP

state of emergency First, I hope this email finds you and yours well. A lot is happening right now, but in these times our mental fitness is put to the test.

While your own well-being should rightly be top priority, there are other things to keep in mind secondary to that.

The biggest concern I have is the political response to this. Only slightly more disconcerting are the people who think stuff like this requires a political response in the first place.

What’s happening while people are shopping, preparing, and quarantined?

The Federal Reserve

The Fed cut rates to near zero (0.5%).

It’s also taking a new approach to quantitative easing or “money printing” as us old-schoolers call it. Inflation is coming, as the dollar is debased again. On March 12, the Fed injected $1.5 trillion in liquidity into the market and save a small blip on the charts, the markets continued to dive:

“The Federal Reserve said it would inject more than $1.5 trillion of temporary liquidity into Wall Street on Thursday and Friday to prevent ominous trading conditions from creating a sharper economic contraction.

“These changes are being made to address highly unusual disruptions in Treasury financing markets associated with the coronavirus outbreak,” the New York Fed said in a statement on Thursday.

“The New York Fed said it would conduct three additional repo offerings worth an additional $1.5 trillion this week, with two separate $500 billion offerings that will last for three months and a third that will mature in one month.

“If the transactions are fully subscribed, they would swell the central bank’s $4.2 trillion asset portfolio by more than 35%.”

These are what’s called “repo operations”. It’s basically a temporary loan to the banks where the Fed buys securities temporarily to liquidate assets and then on the other side of the time frame, the banks have to buy them back and repay the Fed.

Whether that actually happens or not, is yet to be seen. But one thing is sure: the banks will always be bailed out. They never stand a risk of failure. And the Fed has made that abundantly clear.

It goes beyond that of monetary manipulation and picking winners and losers. It’s protracting the economic tolls by sinking every other ship except the banks:

“It’s more bailing out of banks and hedge funds at the expense of those who hold dollars or compete for resources with the bailout firms and industries. By constantly favoring and bailing out bankers and other parts of the financial sector, the Fed has put all other sectors and industries at a disadvantage. As a nonfinancial enterprise, it’s hard to compete for investors and capital when the Fed has guaranteed that the financial sector will be bailed out no matter what.”

People think that because I’m a capitalist, I favor this sort of thing. Couldn’t be further from the truth. I’m aware these things are going to happen so I prepare myself, but I don’t by any means endorse it or condone it.

In a truly free market, people would be free to make choices… and likewise would be free to fail. And this latest wave of QE was a bust, just like every other pedestrian policy that comes out of the Fed.

In this situation, winners are paying for the losses of others. That’s still welfare in my book.

But there’s more…

Cashless Agenda

It’s all foil hat conspiracy theories, until they are proven true. Then it’s just a conspiracy fact. We’ve been discussing the cashless agenda for a while now here at GWP. Nothing like making cash a public safety issue to do away with it right?

I get it. Passing objects from one to another en masse can of course add to the circulation of the virus. For the purposes of sanitation, avoiding cash makes some sense, when done in conjunction with several other best practices.

If you’re washing your hands regularly, washing the food you eat, and wiping down surfaces, then adding that to the list is helpful.

If you aren’t, then it won’t matter much.

But the media is of course making the “case” against using cash, using such examples as China which has made huge strides in their cashless agenda long before the outbreak.

“China is already well into becoming a cashless society despite the outbreak. According to eMarketer, nearly 50% of China’s population used mobile payments to make purchases in the second quarter of 2019. QR code payment platforms, including WeChat and AliPay, have also proven successful and mobile and contactless payment solution providers are expanding into other markets, including mass transit, said Phil Sealy, a digital security research director at ABI Research.”

Civil Liberties

Government has turned wasting money into an Olympic sport, but what it will never waste is a good crisis.

It savors those.

  • National guard was deployed in six states: Florida, Iowa, Louisiana, New York, Rhode Island and Washington

  • California has a cap on gatherings of no more than 250 people, while the CDC guidance suggests gatherings with over 50 people be cancelled or postponed.

The interesting thing about states of emergency is that it doesn’t end until it either is allowed to expire, or the executive calls it off. States of emergency have been allowed to continue long after their original purposes were served.

One example was under Truman: he declared a state of emergency which lead to the Korean War. It never was called off… and next thing you know we’re in Vietnam.

States of emergencies are at the whim of the Executive. The powers allowed under those circumstances is decided by Congress. In 1973 alone, 470 additional powers were enacted by congress to the President in times of crisis. While the National Emergencies Act was supposed to keep endless emergencies in check, the US still has emergencies dating back to 1979.

Some of these “emergencies” are directly connected to our continued tumultuous relationship with Iran and the middle east in general.

Economic Freedom

Bars, wineries, restaurants are being shut down.

“Price gouging” — the key indicator that tells the market where there are shortages — is out of the picture. This leaves the stores to simply ration. How that is any better, I don’t quite know because a finite amount of resources is still the issue.

This of course allows for panic buying and stockpiling rather than encouraging conservation.

In Canada, Prime Minister Justin Trudeau said, We do not want any Canadian to have to worry about whether or not they are going to be able to pay their rent, whether or not they are going to be able to buy groceries or care for their kids.

How are these bills going to be paid? The government foots the bill for the entire country?

Wars

Speaking of the middle east, while everyone is distracted with a new strain of the cold, the US has been bombing Iranian backed militia in Iraq.

I don’t like being dismissive of pandemics, but events like this usher in a lot of activity people would otherwise find objectionable. Watertown, MA was not so long ago where Americans should forget the blatant violation of the 3rd amendment as nearly 10,000 police oddly stood ready to descend upon that town.

And plenty of people remember the gas rationing by President Carter over a 4% reduction in oil production.

Perhaps many were not taught about the food rationing and bomb drills during World War 2?

Priority number one: keep yourself and your families safe and well.

Second, don’t let the hype draw you away from monitoring your freedoms. Regardless of where you are in the world, you know what is best for you better than any politician or bureaucrat.

If something sounds off, it probably is. And if there’s a policy being pushed through in the name of “public safety”, ask yourself: are you getting a commensurate amount of safety from that policy as it will cost you in money and liberties?

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