That has now become the multi-trillion dollar question, and the answer depends on whether you listen to the complex advice from the financial world, or you take a look around your own Main Street.
While we all thought there was a disconnect between Wall Street and Main Street in 2008 and we were separated by a river, today’s climate would indicate we are now oceans away from each other.
To make the comparison even more dramatic, let’s just simply use some realistic stimulus figures. The Fed. has now pumped about $12 trillion into the US financial system. That is in addition to the $2 trillion Congress approved as a stimulus. Of the $14 trillion, barely $350 billion will find its way to small business owners while taxpayers will receive $1,200 each or $2,400 per household based on income restrictions.
Remember that in 2008 we all learned a new phrase: “Too big to fail”. We didn’t clearly understand what that meant, other than most financial institutions were deemed too big, too important, and too essential to be allowed to fail.
When 2010 rolled around, we forgot about TARP and TALF because we were told the economy was back on track and the old economic locomotive was steaming ahead at full speed. Unfortunately, we failed to mention that we were all still speeding on the same old rails.
Ten years later, a new obstacle causes a head-on collision, only this time it is not just the locomotive that gets derailed. All the passenger cars are thrown sideways as well. One would think that the entire train wreck would be deemed “too big to fail”, certainly with the 2008 financial crisis fresh on our minds.
Unfortunately, that is not the case. The first step is to save the financial system with zero interest rates. The second step is to open the flood gates and pump $4 trillion into the secondary corporate bond market, MBS, reversed repo market, swap market, and any other aspect of our fragile financial system.
In essence, let’s safe the locomotive first and worry about the passenger cars later. And forget about the rails! Just try to put the locomotive back on track and pretend we can go back to full speed.
That begs the question about who will really carry the economic torch when the locomotive has been resuscitated?
In order for a railroad to be financially viable it needs passengers. It does not matter how well you repair your locomotive, unless you care for your passengers and clients at the same time, the train will leave the station empty.
This is the fundamental difference between the 2008 crisis and our current pandemic, and yet policymakers try to use the same tools as they continue to focus on financial markets while ignoring their passengers and future clients.
The American consumer will be asked to step up to the plate yet again when the locomotive is ready to run, but how will they be able to board the train when they cannot afford the ticket price.
If our policymakers and our elected officials want us to carry the economic torch, they better make sure we get at least a large box of matches, lest the train will leave the station empty of passengers.
