Opinion: The Fed's emergency rate cut shows the current financial system is powerless and panicked

Opinion: Fed's Emergency Rate Cut Proves Current Financial System is Powerless and Panicked - Fed 600x400 1The world economy is in a state of emergency. Stocks have been plummeting for days and investors are frightened by the spread of covid-19.

While China seems to have finally managed to bring the situation under control, declaring zero new cases of contagion, the countries of the European Union and the United States are experiencing exponential increases.

In yet another attempt to support the markets, the United States announced a second rate cut, bringing interest to almost zero. In addition, the Fed will purchase bonds of at least $ 700 billion to help the market.

Speaking on the issue was Jerome Powell, president of the US Federal Reserve, who said: “We know that the virus will run its course and that the US economy will resume a normal level of activity. Meanwhile, the Fed will continue to use the tools it has to support the flow of credit ”.

However, it appears that the United States is resorting to desperate measures to keep the economy afloat, suggesting that coronavirus may not be the real reason for the current crisis.

All the forces on the field simultaneously

Many Investors they believed that the second cut in the emergency rate was a "sign of despair". According to Terence Wong, CEO of Azure Capital, "basically the United States is running out of ammunition within three weeks [...] There is nothing left." Wong raises a good point.

Coronavirus, assuming that it is the main cause of the current crisis in the financial and stock markets, is not yet at the end of its course. Data show that there are currently 4141 reported cases in the United States, an increase of more than 10% in the past 24 hours.

And the virus is highly contagious and spreads like a fire. There are many countries to prove it, especially in western Europe. Companies are still evaluating the extent of the infection and the impact it could have.

Too early for fund injections?

In light of the above, we will be able to understand the true extent of the epidemic in the United States by the end of the month. Assuming that the virus is the reason behind the current market crash, then there is absolutely no reason why investors should show optimism at this stage.

In addition, all of this will continue unless there is some clarity on the overall spread of the virus and how it could be contained. This means that the timing of the last financial injection and the rate cut are scarce to say the least.

It appears that the government is pouring money while companies don't have a clue as to what the economic environment will look like next week, let alone in the long run.

Markets react

At the opening of the market today, there is a continuity in the main stock exchanges of the world in the decreasing trend of the last few weeks. Cryptocurrency markets are showing slight signs of recovery.

We cannot predict how markets will handle the current crisis, but one thing is certain: the confrontations between now and the financial crash of 2008 have already started to flood the Internet.