U.S. Stimulus Bill - I Just Need Some Liquidity Maaaaan

Robin Williams in 2009, talking about the banks and their liquidity addiction.

Shhh, it actually is.

The banks (generally) have plenty stashed away.  

It's households and businesses that need juicing this time.

Unfortunately, stimulus talks appear to have reached an impasse at the worst possible time.

The recovery is slowing.

The federal reserve is at the limits of what they can do.

Powell has been very clear that the Federal reserve has "lending powers not spending powers".

He also commented, “many borrowers will benefit from these programmes, as will the overall economy, but for others, a loan that could be difficult to repay might not be the answer.”

In simple terms, the Fed can help larger enterprises by providing liquidity, but the government needs to step in and help small/medium businesses (SME's) and individuals.

To top things off, funds from Trumps 'stopgap' executive order are nearly exhausted.

Policymakers from both houses will be stomping the election campaign trail throughout October.

Time is running short.

If there is to be a stimulus bill, then progress needs to be made this week.

Pelosi's deputy chief of staff tweeted this late on Friday.

Let's not get our hopes up too much, but perhaps all is not lost (although we have been here before).

Political commentators Harald Malmgren & Albert Marko both suggest that a deal will be reached in the coming days.

The fact that the "staff machinery is running" guarantees nothing of course.

This could end up as a purely political show to try and gain an edge in the election run-in.

However, no pre-election stimulus package has always been a high risk strategy for both sides to implement.  

It's a sure-fire way to guarantee voter disillusion, and not much else...

Obviously, all of this is speculative, but it will be something to keep a close eye on this week.

Any stimulus package north of $1 trillion would be well received by the markets.

If Albert is even close on the $2.2 trillion figure, then...

Risk sentiment would get a giant shot in the arm, equities would rally, and the havens (USD, JPY, Bonds) would rapidly lose their appeal...

Likewise, if markets get ahead of themselves and begin pricing this in, there could be a strong disappointment trade if no deal is reached.

This is pure speculation

I cannot stress that enough.

It's in bold and big letters actually.

Maybe that is stressing it enough.

Either way, it is set to be another interesting week.  

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