The stock market is not the economy. It can behave irrationally on the belief that everything will get back to the pre covid days. Many of us think that the world has changed permanently and that growth will be slow and painful as we adjust to new environment. The real impact of the virus will hit in the fall when economy will continue to be weak and reality will set in.

I agree that the definition of money is changed considerably in this digital age. But I think there still is a liquidity trap in that liquidity is held closely by the banks

It could get worse as the bank's contend with loan losses and the fear of a worsening credit environment.

Your point about the intersection of demand and supply is right on. There is a weakening supply supply and also a diminished demand as the economy slows down. A rather dismal Outlook.

Everything just goes at a slower speed--- hence the term velocity.

The decline in long term rates is a function of deflation and the elimination of the term premium. Both are a reflection of falling velocity. Velocity is driving yields down.

Worse yet it's all being plugged with debt. Nobody seems to want to raise equity to ward off insolvency because it will mean a watering down of share values. The system is becoming totally corrupted by the obsession with share values.

I had to pour a large scotch after wrote it.

Thanks, Gary. The workings are much more specific as to target rates.The BoJ are clear that the 10yr be zero-- the fear is that it would go negative in the absence of their intervention. I see it as a one-way street, i.e. preventing yields from going negative. In WWII it was a case of preventing yields from going higher. Inflation is not the enemy, but deflation is. We should only be lucky to have a positively sloped curve and some inflation as an indication that growth is taking hold.

I agree with you that we need helicopter money. The Fed should credit the banks with as much money that is needed to prompt spending. Right now, it is just filling a hole as monthly debts come due --not promoting growth.

Thanks

I am not sure it's going to work because the problem is so vast and we do not really understand the full ramifications.

I agree that we should seriously consider helicopter money. This has always been the last resort deflationary world and it appears that we are heading in that direction.

Your point about the scale in China overwhelms that of the United States is so important. The Trump administration does not appreciate just how powerful the middle class is in China and how much this virus will hurt Chinese purchases from United States for both goods and services.