a novel by Ernest Hemingway once described bankruptcy as an experience that occurs “two ways: gradually, then suddenly”. The economic response to the covid-19 pandemic has followed this pattern. For weeks policymakers dithered, even as forecasts for the likely economic damage worsened. But in the space of just a few days the rich world has shifted decisively. Many governments are now on a war footing, promising massive state intervention and control over economic activity.
Grim numbers are starting to pile up elsewhere, not so much in the official statistics, which take time to be published, as in “real-time” economic data produced by the private sector. Across the world, attendance at restaurants has fallen by half, according to OpenTable, a booking platform. International-passenger arrivals at the five biggest American airports are down by at least 30%. Box-office receipts have crumpled .
Even that is likely to prove optimistic. On March 17th analysts at Goldman Sachs noted that they had “not yet built a full lockdown scenario” into their forecasts for advanced economies outside Europe. Forecasts for America, which is at an earlier stage than Europe and Asia when it comes to the outbreak, remain Panglossian; very slow growth in China and a big recession in Europe could by itself be enough to send the world’s largest economy the same way.
Take companies first. China, where the outbreak has slowed, is now trying to get people out and buying things. Foshan, a city in Guangdong province, has launched a subsidy programme for people buying cars. Some cities have started giving out coupons that can be spent in local shops and restaurants. Nanjing this month gave out e-vouchers worth 318m yuan .
Other countries are enacting similar plans. The Japanese government is helping small firms by mobilising its state-owned lenders to provide up to ¥1.6trn of emergency loans, much of it free of interest and collateral requirements. Small firms qualify for help if their monthly sales fall at least 15% below a normal month’s takings.
It might be. The Trump administration’s plan to funnel money directly to households, if approved by Congress, is the most significant policy. It bears some resemblance to a scheme that was introduced in February in Hong Kong, in which the government offered HK$10,000 directly to every permanent resident. Mr Mnuchin is thought to favour a cheque of $1,000 per American—roughly equal to one week’s average wages for a private-sector worker—with the possibility of a second cheque later.
Getting back to “normal” in the long-term could be as big a challenge as getting through the short-term economic dislocation.
Lets stimulate the economy that we’re asking the world to close. GENIUS!
Welcome back war capitalism.
Ek kam kar tu kanika se mil kar aa..tere liye me prayer kar lunga.. Bada wellwisher ban raha h na
Better to help them close and convert as soon as possible to something essential. Unfortunate but it is a war economy.
For many firms, no matter how much the government helps them reduce costs, revenues are will fall further
Modest? Almost useless for many.
The GOP don't care about workers' rights because we don't donate to their election campaigns. GOP don't know what struggle&poverty means until they experience it themselves. Unfortunately, they are paid handsomely; I say politicians' salary should match the middle-class wage.
The bankers are really happy with this
Are we playing with Monopoly money now?
Let's suppose each person gets a million dollars. What can they spend it on? No restaurants, outdoor entertainment, vacations, etc. Also if everyone gets a million then guess how much a cup of Starbucks coffee will cost? $500, $800 ? Come on Germany, you can do better....
manavjivan Probably Germany is giving out our cash.
Good move
Yass! Spend, spend, spend
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Source: TheEconomist - 🏆 6. / 92 Read more »