Covid-19 Stimulus: South China Morning Post

Central banks around the globe organize massive stimulus programs from central banks, but these are not without risk. By reducing interest rates and rapidly investing in a range of assets to prop up prices, central bankers hope to save jobs and prevent a long economic depression. Governments already holding heavy debt extend rescues to a range of businesses, including some that would have failed without the Covid-19 crisis. Stock markets and corporate bonds rallied. The price, though, may be distorted markets, rising inequality, inflation, increased dependence on central banks along with more demands, and mounds of debt for future generations, warns Nicholas Spiro, writing for the South China Morning Post. The International Monetary Fund estimates the total stimulus bill to cost US$14 trillion. Investors increasingly count on central-bank rescues, overlooking mounting job losses that are sure to slow consumer spending. Spiro concludes: “the most troubling aspect of the aggressive stimulus being deployed is that it will make the post-pandemic financial landscape a lot riskier – a terrifying thought given that the Covid-19 crisis has only just begun.” – YaleGlobal

Covid-19 Stimulus: South China Morning Post

Central banks try aggressive steps to rescue economies, including purchasing debt of companies, shoring up asset prices – but there could be post-pandemic risks
Nicholas Spiro
Friday, May 15, 2020

Read the article from the South China Morning Post about the need for stimulus programs from central banks and the risks.

Nicholas Spiro is a partner at Lauressa Advisory, a specialist London-based real estate and macroeconomic advisory firm. He is an expert on advanced and emerging economies and a regular commentator on financial and macro-political developments.

Before Covid-19: Government Debt, % of GDP, Selected Nations : China	55% Germany	60% UK	86% France	98% Italy	135% US 	197% Japan	238%
Crisis: Some nations carried heavy debt loads before the pandemic struck (Source: World Bank and nations)

Covid-19: Selected Central Banks and Policy Responses: US $484 billion Paycheck Protection and Health Care Enhancement Act $2.3 trillion Coronavirus Aid, Relief and Economy Security Act $8.3 billion Coronavirus Preparedness and Response Supplemental Appropriations Act $192 billion Families First Coronavirus Response Act;  China	 RMB 2.6 trillion fiscal and financing measures Liquidity injection of RMB 3.33 trillion in the banking system Expand relending and re-discounting facilities with RMB 1.8 trillion; European Commission €540 billion for crisis support, government guarantees and a temporary loan-based instrument to protect jobs €37 billion for the Coronavirus Response Investment Initiatives €800 to extend EU Solidarity Fund €1 billion redirected from EU budget as guarantee for the European Investment Fund to provide liquidity €3 billion macro-financial assistance  Announce credit holidays for crisis-affected debtors €120 billion for asset purchases   Reduced interest rates; targeted collateral easing  €750 billion asset purchase program of private and public sector securities ; Japan  ¥117.1 trillion Emergency Economic Package Against COVID-19, including cash payments to individuals and protection for businesses and employment  Pledged additional US$100 million contribution to the IMF’s Catastrophe Containment and Relief Trust to support grant-based debt service relief Increasing contribution to the IMF Poverty Reduction and Growth Trust, encouraging other nations to join with matching contributions
Global response: The IMF summarizes and updates key policy responses from more than 190 governments to limit the human and economic impact of the Covid-19 pandemic (Source: IMF)

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