Hirst: Crisis Has Unbelievable Matrix of Knock-On Effects

Your Real Vision Daily Briefing for April 1, 2020

Real Vision’s Ash Bennington hosts Roger Hirst to continue their in-depth analysis of the coronavirus crisis.

  • The speed and size of what central banks and governments have done so far is incredible, but it’s unlikely they can provide monetary impact in time to truly alleviate pain in the real economy.
  • Small and medium-sized businesses are the hardest hit, and stimulus dollars are being sapped by business owners with savvy financial advisors, leaving mom-and-pop shops at greater risk.
  • The potential for debilitating inflation will likely drive demand for gold higher, especially if yields are capped on the other side.

GET REAL VISION'S FREE DAILY BRIEFING DELIVERED DIRECTLY TO YOUR INBOX EVERY DAY AFTER MARKETS CLOSE

Get the latest information as we analyze the next phase of our new global economy and discuss what we think is to come.

The real risk of the economic crisis lies in the time it takes for money to reach the real economy, Roger Hirst said during today’s Real Vision Daily Briefing.

Fiscal takes time and the monetary conduit is not an easy one to the real world, he said, while discussing the impact to small and medium enterprises with Real Vision’s Ash Bennington.

Bennington said the reality on the ground is the people who run small and medium-sized businesses – which account for 2/3 of the net new private job creation – are afraid. Meanwhile the $350 billion in aid is being taken up by business owners with savvy financial advisors and accountants walking them through process, while mom and pop businesses are getting crushed. 

They both agreed this is indicative of how difficult it is to get money to the parts of the real economy that need it most in time to save them. They also said that even large companies are in lose-lose situations as they try to mitigate damage. 

Shell (RDS.B) took a $13 billion disbursement to ensure they can keep their dividend going, while companies like HSBC (HSBC) and Standard Chartered are cutting dividends to hold onto cash, which represents pension income for a lot of people.

“You take from one to give to the other and you probably net lose on both because of the slippage,” said Hirst. “It’s an unbelievable matrix of knock-on effects.”

One of the most debilitating effects of the economic lockdown could be long-term inflation, which Hirst expects will drive the demand for gold higher.

“Gold is the thing that people will want for the next phase” as we head toward true yield curve controls in the U.S., he said.