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Situational Awareness: Finance ministers from G7 countries will hold a teleconference this week to coordinate a response to the coronavirus outbreak. (Bloomberg)
🎙“You can kill ten of our men for every one we kill of yours. But even at those odds, you will lose and we will win.” - See who said it and why it matters at the bottom.
Illustration: Sarah Grillo/Axios
Top officers at America's largest bank lobbying organization are calling on the Fed to not only cut U.S. interest rates, but also institute a series of reforms that were last put in place during the 2008 financial crisis.
What's happening: The president and CEO, the chief economist and the head of research of the Bank Policy Institute, which represents the nation's leading banks, posted a blog Sunday laying out a set of policy prescriptions they encourage the Fed to use to fight possible economic damage from the coronavirus outbreak.
Why it matters: The note shows how worried banking industry advocates are about the impact of COVID-19.
Illustration: Sarah Grillo/Axios
The economy according to Bernie Sanders looks unlike anything any politician this close to the presidency has ever put forth before. It's a rethinking of the entire American economic model.
What it means: To understand the Bernie economy — his plans for free health care, college tuition and a government-guaranteed job for every American — it helps to view it through the lens of modern monetary theory, or MMT.
The premise is fairly simple: MMT argues that the way we have viewed government policy — that it's like a household with a fixed capacity for earning and spending — is wrong.
Details: "We need to make budgets centered around our real resource capacity and not some arbitrary, imaginary revenue constraint," Stephanie Kelton, an economics professor at Stony Brook University and MMT's most well-known advocate, told Axios recently on the sidelines of the National Association for Business Economics conference in Washington.
The intrigue: Critics point out that Sanders' ideas for increasing government revenue — including heavy taxes on the wealthy, raising the corporate tax rate to 35%, and eliminating most corporate tax breaks and loopholes — will fall well short of paying for the new programs he proposes.
The takeaway: There's no telling whether Kelton and Sanders are right, because no government has ever attempted to implement the MMT approach.
The bottom line: Sanders' economic agenda is not merely to "give people free stuff."
While MMT is viewed at best with trepidation and at worst with contempt by most mainstream economists, many of its tentpole findings are in step with those of today's top economic thought leaders.
Yes, but: Kelton says the economy is "resource constrained," so there is some limit on how much policymakers can spend. She just hasn't calculated what that is and puts the onus on Congress to "manage that risk."
Washington state declared an emergency as two people died and more coronavirus cases were discovered inside a nursing home, plus New York had its first reported case. (N.Y. Times)
Walmart and Verizon are in discussions to outfit the retailer’s stores with antennas and equipment to create 5G wireless service at two locations this year. (WSJ)
China's manufacturing activity dropped to a record low of 35.7 in February, well below consensus, and a reading of its services sector was even weaker with non-manufacturing PMI falling to 29.6 in January. (SCMP)
Photo: Sarah Silbiger/Getty Images
Fed chair Jerome Powell's statement on Friday afternoon that the U.S. central bank was "closely monitoring developments" and would "act as appropriate to support the economy" has eliminated any doubt that the Fed will cut U.S. interest rates at its meeting on March 17–18.
What we're hearing: "A Fed cut in March appears nearly certain," analysts at Goldman Sachs said in a late Sunday note to clients.
Where it stands: U.S. interest rates are currently set at 1.50%–1.75%, and cuts at that level would take them to 0.5%, giving the U.S. negative "real" rates — well below the level of inflation, according to the personal consumption expenditures measure the Fed favors.
What's happening: Speculation that the rate cuts are on the way helped pare losses in U.S. stock market futures prices, as did comments from Bank of Japan governor Haruhiko Kuroda who said the central bank would provide “ample liquidity and ensure stability in financial markets through appropriate market operations and asset purchases.”
The big picture: Guggenheim Partners global CIO Scott Minerd, a member of the New York Fed's investor advisory committee, said last week that he had been contacted by officials and was expecting a statement regarding "some sort of monetary coordination."
Worth noting: The Fed cut rates three times in 2019 and has added nearly $400 billion to its balance sheet through a new bond-buying program it began after the repo market spike in September.
The coronavirus outbreak has sparked one of the worst routs in commodity prices in years, WSJ's Amrith Ramkumar writes.
What's happening: Commodities have been among the hardest hit investments since the outbreak began spreading around the globe.
The big picture: Commodity prices can provide a real-time indicator of activity, and "the current slide reflects slumping demand and bloated inventories."
On March 2, 1946, Ho Chi Minh became president of North Vietnam, sparking a series of events that would lead the U.S. to invade the country, beginning what was then the longest-ever U.S. war.