A sea of fresh cash: how the world’s leading economies give a real battle of panic in the financial markets and save businesses, — Sergiy Yevtushenko, Managing Partner of UDP Renewables
The world’s leading economies have a clear plan for minimizing the damage caused by the coronavirus pandemic and the economic crisis. This plan can be described as Rush for Cash.
The losses from these events will be enormous -— according to JP Morgan, the losses of the largest economy of the world — the American one — in the first quarter of the year will make 4% of GDP, and in the second — 14%. In the euro area, the situation is no less dramatic — ECB President Christine Lagarde voiced her forecast: “Minus only 5% of GDP by the year.”
The situation is similar in the economies of each of the G20. Everyone is preparing for the perfect storm that has just begun to cover the world economy.
“Extraordinary times require extraordinary action, and our determination to resist recession has no limits,” said Christine Lagarde, emphasizing the common sentiment of the West’s financial institutions to give a real battle of despair and panic in the financial markets.
Communication from financial authorities and regulators has become very intense, regular and focused on achieving the overarching goal of convincing businesses of their maximum mobilization, readiness to solve all business problems and preventing panic, which is a major destructive element of the coronavirus pandemic.
Anticrisis tools are already familiar and tested in the 2008 crisis — there is no such problem that impossible to pour in a lot of fresh cash.
It’s under these slogans that the Central Banks of the Western countries launch printing presses and begin to pump their economies with liquidity through the EQ (quantitative easing – the redemption of any securities) and Helicopter Money (distribution of money to the population) programs.
New liquidity volumes are impressive. In the US, total support for the economy and the banking system is already under $2 trillion. And this is without taking into account the support programs of particular industries that have taken the brunt of the crisis, such as the aviation and tourism sectors. World airlines are just starting to line up for state aid packages.
The European Central Bank is preparing to launch a €750 billion Pandemic Emergency Purchase Program (PEPP) initially, but with signals of any lack of limits on the scope of future infusions.
To the last cent, US banks have bailed out the US $ 85 million Federal Reserve loan program. Credit terms for banks are 0-0.25% for a long time. Accordingly, within a few weeks, lending at 1-1.25% will become available for US businesses and this resource will be worth gold. Not only because of cost but also timeliness.
US banks to the last cent raked in $85 million from the FED’s assistance program. Conditions of access to credit for banks — 0-0.25% for a long time. Accordingly, within a few weeks, lending at 1-1.25% will become available for US businesses and this resource will be worth gold. Not only because of cost but also timeliness.
Parallel to the parliaments of the countries, anti-crisis legislation is introduced, which provides a whole package of benefits and tax breaks for the crisis period for the population and business. The level of tax burden for the period of crisis is reduced, access to credit is simplified, government orders are being brought to the market en masse.
These unprecedented volumes of resources and enormous efforts are aimed at one thing — not to give ordinary companies and industries the opportunity to suffer bankruptcy, irreparable losses and permanent redundancies.
After all, according to dry statistics — the figures for GDP reduction and unemployment growth — there are thousands of companies that are likely to go bankrupt and tens and millions of people who do not have jobs and livelihoods at the most inappropriate time.
Politicians in the West clearly understand that crises come and go, and business remains. It provides job creation, decent pay and taxes, and most importantly, an awareness of the fact that the country is working and developing and everything will be fine with it.