A weekend topic starting with Yahoo Finance. "The Federal Reserve slashed interest rates by half a percentage point last week, citing a need to protect small- to medium-sized businesses from the economic ripple effects of the coronavirus. But a Seattle-based regional bank doubts that lower interest rates will build confidence in a community grappling with its own coronavirus outbreak. In the suburb of Kirkland, Washington, an outbreak at a nursing facility led to 10 deaths alone. WaFd Bank operates a branch a mile away from the Life Care Center, and WaFd CEO Brent Beardall says the rate cut gives 'credence to the kind of panic' reminiscent of 2008."

"'The reality is, there was no crunch on credit where credit wasn’t available last week before the Fed cut,' Beardall told Yahoo Finance. 'Businesses in Kirkland that needed lending capacity, it was there and available to them. And today it’s a little bit cheaper but what does 50 basis points really do? I’m not sure it does that much.'"

"'My biggest fear is, because of the perception that everybody needs to grind to a halt, we will essentially talk ourselves into a recession,' Beardall said. 'People will stop going out to eat, people will stop traveling and everything and then it becomes a self-fulfilling prophecy.'"

The Reno Gazette Journal in Nevada. "When an event like the coronavirus outbreak dissuades a large number people from flying to Las Vegas, occupancy rates in hotels along the Strip drop. 'We’re talking about a service industry where labor is a big portion of the daily cost for these companies, and when there’s irregular demand, there’s nothing you can do on the cost side,' said Chad Beynon, a gaming analyst with Macquarie Securities. 'Employees are still getting paid. They’re still working, so you just burn cash. That’s the scary thing.'"

"The financial collapse between 2007 and 2009 caused unprecedented disruptions in consumption-related industries. During that time, MGM Resorts’ stock price dropped from $99.75 a share to $1.89 a share. Visitor volume dropped by almost 3 million. Nevada’s unemployment rate hit 11.8 percent – and more than 19,000 workers in the hospitality business lost their jobs."

"Anthony Curtis has been tracking the feelings of tourists on the Strip since the 1980s. 'People are completely bonkers nervous about this,' said Curtis, who often stops in bars on his way home. On a trip this week, the bars were empty. 'I stopped at three bars. Each had one or two patrons. I talked to the bartenders and asked, ‘Is this what’s going on here?’ Nobody’s sure.'"

The Times of London. "The scene was straight out of a Hollywood disaster film. A coastguard helicopter hovered over a cruise ship bobbing in the Pacific, barred from docking amid fears that the killer virus on board would spread to land. The chopper dropped a cache of testing kits and then peeled away, leaving 3,500 passengers and crew unsure when they would be allowed to rejoin civilisation."

"This happened on Thursday when officials quarantined the Grand Princess off the California coast in the hope of containing the coronavirus. Despite San Francisco’s efforts, the virus arrived in the unofficial capital of the tech industry anyway. Companies have told workers to stay at home. Schools have been closed. About 800 miles up the coast in Seattle, where the first case in America was reported, a similar lockdown was enforced."

"Sequoia Capital, the venture capitalist famed for backing Google, warned its portfolio companies to cut costs and prepare for the worst: 'Coronavirus is the black swan of 2020.'"

The Houston Chronicle in Texas. "The new coronavirus is the latest international shock to hit the local economy. Scott Stearns, director of supply chain for MacroFab, an electronics manufacturer and manufacturing platform in Houston, said the difficulty in getting components from its supplier in China has more than doubled the time it takes for his company to assemble and ship printed circuit boards to customers such as Apple and Google, raising costs, lowering volumes and cutting sales. Executives estimate that revenues could fall 30 percent in the first three months of the year."

"'I’m just learning the tariffs, trying to incorporate that into our pricing model to make sure we’re not eating it, and then boom, this comes in,' Stearns said. 'It’s been very painful.'"

"China’s demand for crude has slipped by 1 million to 3 million barrels per day, according to various estimates, as analysts downgrade oil consumption forecasts. Global oil demand fell by nearly 5 million barrels a day in February, according to the Norwegian consultancy Rystad Energy. Oil prices, which are down more than 30 percent since the beginning of the year, settled below $42 a barrel."

"Oil and gas companies in Texas are particularly exposed to the oil price drop, economists said, since many were already struggling to fund planned investments in 2020. Many have bet heavily on shale in West Texas, a play that needs a constant flow of capital to keep drilling as wells deplete. 'It’s a big demand shock for oil consumption,' said Jesse Thompson, an economist at the Dallas Fed. 'At that price point, there are some (exploration and production) companies that are not going to be able to make their break-even. That could translate in Houston to job (cuts).'"

The Wall Street Journal on China. "A sharp economic slowdown in China caused by the coronavirus epidemic is putting new pressure on the country’s labor market, as businesses struggling to maintain or revive operations resort to pay cuts and layoffs—or simply shut down. Jim Huang, chief executive of China-America Commodity Data Analytics, a consulting firm, said he had no choice but to lay off 18 of his 20 employees in Wuhan after it became impossible to run his business in the hard-hit city because of a government quarantine there."

"Many of his employees were in other parts of China when the lockdown started and couldn’t return, he said, making it difficult to serve clients and keep cash coming in. 'I believe we have already entered into a recession' in China, he said."

The Daily Telegraph in Australia. "Buyers face a dilemma as house prices are poised for another year of whirlwind rises — get in now or wait and see if the coronavirus will slam the brakes on the market. Economic modelling showed the median price of a Harbour City home was expected to finish the year another 10 per cent higher, due to the recent spate of interest rate cuts and historically cheap credit. But experts have warned the coronavirus could wreck those predictions if people were too scared to attend open houses and auctions."

"Housing experts said the cheap credit environment was 'super juice' for the market and prices had increased by an average of 12.7 per cent since the first of the four RBA cuts in June. Before the rate cuts, the Sydney median price dropped about 15 per cent between mid-2017 and mid-2019, CoreLogic data showed. There were also isolated pockets around the city where vendors were offering higher discounts and properties were taking longer to sell, suggesting buyers had more negotiating power."

"Houses in the inner west suburb of Five Dock were down about 9 per cent from a year ago and took an average of nearly three months to sell. They typically changed hands at prices 10 per cent lower than advertised, REA Group data showed. There was a similar environment in St George enclave Blakehurst, where vendor discounts averaged 8 per cent."

From Macleans on Canada. "Not all superheroes wear capes. In Canada they carry loan applications and have wallets stuffed with credit cards. When the Great Recession hit more than a decade ago, shoppers and homebuyers eagerly heeded the Bank of Canada’s emergency interest rate signal and carried the economy through the crisis relatively unscathed. Then came the sequel in 2015 — as tumbling oil prices threatened economic chaos, the bank again summoned Canada’s bruised and battered households to unleash their power of debt accumulation to vanquish yet another downturn."

"This past week Bank of Canada Governor Stephen Poloz released his script for saving the economy from coronavirus, and like a tired trilogy that keeps rehashing the same exhausted plot line, households are expected to play the role of economy-savers for the third time in 12 years. But if we’ve learned anything from the first two instalments of this gruelling spectacle, it’s that they always seem to end with a glaringly obvious twist — out of control house prices and dangerously over-extended households."

"On March 4 the bank cut its overnight target rate by half a percent to 1.25 per cent. That was the first cut since 2015, and by making such a large move — rate cuts are typically done 0.25 per cent at a time — it was meant to get our hero’s attention. The latest call to spend comes as households were showing signs of making the painful adjustment from their previous debt binges. Insolvencies, specifically consumer proposals, have been increasing at the fastest pace since the Great Recession."

"At the same time the annual growth in consumer credit has slowed from 5.6 per cent in 2017 to just 2.4 per cent in January. That reduced borrowing had sapped consumer appetites for everything from home furnishings and clothing to new vehicles and electronics. Instead, with Canada’s economy already more dependent on indebted households than at any time since at least the 1960s, and with the economy facing headwinds from the recent rail blockades and uncertainty over the spread of coronavirus, the hope is that cheap money will keep consumers spending and that households can bail out the economy yet again."

"That’s not exactly how Poloz has framed the bank’s rate cut, of course. He did warn that the plunge in oil prices to their lowest level since 2016 could spread throughout the rest of the economy as those directly affected 'spend less money on everything.'"

"'The downside risks to the economy today are more than sufficient to outweigh our continuing concern about financial vulnerabilities,' he said, using central banker speak for the state of Canada’s overextended households and the risk they pose to the financial system. He also brushed away concerns that Canadians in some real estate markets will do what they have done every other time rates have been cut — drive expectations of home prices higher and stretch their finances dangerously thin to avoid missing out on the gains. 'Declining consumer confidence would naturally lead to reduced activity in the housing market,' he said in his speech. 'In this context, lower interest rates will actually help to stabilize the housing market, rather than contribute to froth.'"

"In other words, Poloz is betting house prices are about to fall, and the action he’s taking now is meant to prevent those declines. From the perspective of encouraging more affordability for first-time buyers, that’s an odd strategy, but these are odd times. Today Canadian households are carrying more than $2.9 trillion in consumer and mortgage debt, nearly double their debt load before the Great Recession hit, which makes every cut that much more powerful. It’s entirely possible that we come out of the next few months with both a battered economy as well as higher house prices and even more indebted households. A superheroes work, it seems, is never done."

From George Schultze at Forbes. "When I studied economics at Rutgers College and then at Columbia University’s Graduate School of Business, it was a serious, some might even say boring, subject. The most important macroeconomic debates at the time centered on whether monetary or fiscal policy was the better tool for managing an economy. There were disagreements among the top thinkers to be sure, but everyone agreed on the fundamental principles. That’s not necessarily the case anymore. Certainly not when Modern Monetary Theory (MMT) comes into play. "

"The proponents of MMT, such as Bernie Sanders’ economic advisor Stephanie Kelton, say that self-imposed limits on fiscal spending in the US are holding back economic growth and frustratingly limiting sorely-needed inflation. They advise that the government should therefore just print another $500 BN of new money to pay for things. However, MMT proponents fail to acknowledge that this path is a slippery slope and the same one that’s caused many other economies to topple when investors lose confidence."

"In their rush to come up with a new and better theory for managing today’s 'modern' economy, they omit consideration of whether old statistical measures (like CPI) should also be revamped. If they had, they would have to concede that a more modern measure of prices for managing an economy should incorporate the measurement of asset bubbles. This is because big asset bubbles have preceded many modern recessions, even though CPI appeared tame at the time."

"As I’ve noted previously in this space, numerous asset bubbles are expanding and the bursting of any one of them could prove catastrophic. The US is in the middle of its longest economic expansion in history, but we have no idea how and when it will end. However, the bursting of historic asset bubbles – from the tulip mania in the 1600s, the tech bubble of the late 20th century, and the housing bubble this century – has rarely been benign. Economic growth usually contracts after big asset bubbles burst, and the systemic reverberations from larger ones are greater, as we saw in the aftermath of the Great Financial Crisis."

"I do not want to be an economic Cassandra, but MMT goes against every major economic principle – supply & demand, limited resources, rational behavior, incentives, etc. With this in mind, MMT proponents would be wise to come clean about the real risks of their proposals."

"My final question to MMT proponents is how have historic economies that printed lots of money fared over the long term, and how might a review of asset bubbles that preceded systemic collapses give us additional tools to monitor today’s real inflationary risks? I would submit that all these important economic questions are simply being ignored by MMT proponents. With that in mind, we would all be well-advised to get back to balancing our collective checkbook, while keeping a close eye on the massive asset bubbles that ultra-loose monetary policy has already bestowed upon us. Doing so will help us reduce the risk of future systemic collapses over the course of a full and inevitable economic cycle."