The Many Programs of Cash

No doubt with the CoVid-19 shutdowns, the economic damage to many Americans has been devastating.

Oddly enough, some artisans and vendors are barely affected by the shutdowns and others are telling me they are busier than ever. 

Generally speaking, certain service sectors like salons, gyms and the like have been heavily restricted in their ability to service their patrons. Restaurants, bars, and boutiques, among some select other sectors, have also been severely affected. 

Because of the damage to American pocketbooks, the universally agreed-upon government stimulus payments and various supplemental paycheck and unemployment programs were sent out fairly early in the crisis by Uncle Sam and without much political resistance.  

Although many programs lasted months, the programs designed to help individuals and small businesses all have ended months ago. 

The larger systemic supplemental payments and backstops in a variety of areas however never ended and many are ongoing such as the open market operations and repurchase agreements of the Federal Reserve. These programs are designed to keep the large money conduits open to large businesses and financial institutions and encompass much larger amounts than what was sent out to individuals. 

Certainly, a bone of contention among many, the claims that the amounts going to individuals are woefully insufficient to abound.

I would add that if the average Joe knew the amounts funneled into the financial gears of the economy compared to what Joe is getting, it is quite literally comparing hundreds of billions versus many trillions. 

Keep in mind a billion is a 1,000 million and a trillion is a 1,000 billion. And although the second round of assistance programs are still log-jammed in the ivory halls of Washington, the money spigots remain wide open in order to keep the financial markets from seizing up, much like they did during 2008/09. 

For example, in the first CoVid payments, individuals received about 560 billion with small businesses garnering another 377 billion. Large corporations, financial entities, cities, and states received about 840 billion. Doesn’t sound like a huge difference but that’s not all the assistance funds pouring out of the Federal Reserve to aid the financial system and its players.  

The Repurchase Agreement Market alone (REPO) has swallowed up anywhere from 300 to 900 billion a month

since March and the Brookings Institute brings this eye-popping mention even farther forward: “It (the Federal Reserve) is offering $1 trillion in daily overnight repo, and $500 billion in one month and $500 billion in three-month repo programs. The Fed has also extended the facility to run until March 31, 2021”.

I had to reread those figures again to make sure I was not suffering from a macular degeneration moment. 

Keep in mind this is only some of what we do know. Digging a little deeper, one finds program after program living beneath the ground, all initiated by the Feds in some form or another, and none of them held up by political gridlock. 

One could argue the difference in both sets of programs come from different sources. Financial assistance to keep the system afloat are monetary in nature, therefore undertaken by the Federal Reserve, while the stimulus programs to mom and pop are fiscal in nature, which is undertaken by the Treasury. 

Both however obviously have the permission of elected officials or they would never be. 

Another argument for the difference in one type of program ending while another continues is that both political aisles agree that the Feds massive monetary injections are systemic in nature, and without such ongoing payments, the system itself would collapse. Mom and pop however do not threaten the system at large, hence the lack of urgency to initiate new packages in a timely fashion.

Seems like Déjà vu all over again doesn’t it?

No matter what the financial happenings really are behind this curtain of money, it is unarguable a huge wall of money better described as a Tsunami of cash.  With records being set every day as to the copious amounts that are being administered during this crisis, it is apparent that at least the financial system will likely survive CoVid-19. 

We can only hope that, although the system will come out the other end, that enough everyday Americans will also fare as well. 

Opinions expressed here are those of Mr. Cuniberti and not those of any bank or investment advisory firm. Nothing stated is meant to insure a guarantee, or to be construed as investment advice. Neither Money Management Radio (“Money Matters”) receive, control, access or monitor client funds, accounts, or portfolios. For a list of the services offered by Mr. Cuniberti, call (530)559-1214. California Insurance License #0L34249 and Medicare Agent approved.  Insurance services offered independently through Marc Cuniberti and not affiliated with any RIA firm or entity. Email: [email protected].

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