Personally I don't think so. All the selling so far is first order obvious things... Airlines, travel...

The knock on effects are less predictable and will come later in the crisis. A lot of lower income workers are going to be hit hard as service sector takes a big hit. Those workers tend to spend all their income, so every dollar lost there translates to another dollar the broader economy loses.

That's where the Minsky moment will happen IMO.

>All the selling so far is first order obvious things... Airlines, travel...

I'm not an expert, but there's lots of money in index funds too, and those might be getting sold as well. The other first order obvious thing being people will want some cash.

I think it's a wait and see on how much the retail index investor will pull out.

A lot of people have been conditioned to "buy and hold"... And the retail brokers have been pushing hard to prevent clients from selling.

My broker (Fidelity) went so far as to change the home page to exclude the very nasty graphs that show huge market declines.

anecdotally - maybe. Fewer people are eating out, travel plans are on hold, behavior is changing very fast.

> Leading to a [...] severe demand for cash.

Callooh! Callay! Something to sponge up the Global Savings Glut!

Strange. I'd swear that there's a glut of borrowing, not saving.

Why can't there be both?

There's lots of capital with nowhere to go, hence bonkers real estate prices, wacky startups getting funded, overpriced assets and low bond yields.

There's also of people without much capital who want to do things like buy cars and houses or start businesses.

These things aren't mutually exclusive. The capital is largely held by a small number of people. Most people don't have any or not very much.

There’s a difference between capital and printed money. Capital is the result of forgone consumption, of producing more than is consumed. Much of what people call “capital” is really just inflated paper claims to assets. A share of stock is not capital, it is just a fractional claim on the residual earnings produced by a business. Capital isn’t magically created when stock prices are bid up, because the underlying assets (“capital”) of the business don’t change.

Ok, change all of my uses of "capital" to "cash" and it still holds.

Most capital can be readily exchanged for cash, hence it can be referring to as "liquid assets".

Where wealth comes from is an interesting question, but not especially relevant to the topic at hand.

This is where the problem lies. Sure, liquid assets are as good as cash... until they aren’t. If everyone tries to convert assets to cash simultaneously, then cash gets scarce really quick and the difference between the two becomes clear.

This is completely relevant to the Minsky moment, because it is the illusion of wealth created by inflated asset values that leads people to take excess risks.

The price of borrowing has never been lower. Stable governments can borrow at negative real rates. When prices drop it means there is more supply than demand.

One doesn't exist without the other (unless you are saving real goods).