Submitted by Michael Every of Rabobank

As COVID-19 continues to spread worldwide, economies slump, stocks of personal protective equipment and key drugs dwindle in the US, and as Americans buy record numbers of guns, the market focus today is arguably going to be on one thing:

How high is the spike in US initial jobless claims going to be this week? Last Thursday saw a staggering 3.3 million figure, far worse than what were already shocking consensus figures, and producing the kind of chart that many observers presumed must have been a mistake. It wasn't – and this time round the expectation is 3.7 million newly jobless.

Yet there is a further claim to be made today: what the market should be focusing on is whether there are still markets.

To put it another way, how much and how rapidly are Western economies going to look like their Chinese counterpart (which is not recognized as a market economy)?

On a surface level we already see lockdowns, and state drones in the sky monitoring people to see what they are doing, virus-wise; or intelligence agencies using mobile phone monitoring to see where people have been, again to track the virus spread and infection risk. Yet those are arguably just to fight the virus itself.

Economically and financially we can also see that we are about to face fiscal deficits of 10-20% of GDP with no prospect of that debt being dealt with the 'traditional way' and repaid (which overlooks the fact that financial repression and de facto default is actually the traditional way and arguably more effective for economic development if the state is spending the money right).

We are already used to zero rates in the West – which are lower than in China by the way. We are used to an alphabetti spaghetti of different central bank mechanisms to try --and largely fail-- to force liquidity into the parts of the productive economy that actually need it as opposed to the bloated and/or extractive and/or low productivity zombies that really don't.

We now have yield curve control too: sovereign bond yields are going to be where they need to be. So while any part of the curve that central banks don't control yet can still go wild for now, that will just end up with the central banks extending their powers to it too eventually. The price will be what they want it to be.