The American household finds itself under extreme duress as loss of income and jobs caused by the pandemic is on vivid display inside the June U.S. Personal Income and Spending Report. Despite a robust increase in spending, based on income dynamics that are in play during the pandemic, it is quite clear that this is not sustainable and represents the zenith in the release of pent up demand following the reopening of the economy in May. … READ MORE >
Joe Brusuelas
Policy improvisation is needed to prevent broader business catastrophe: Three fixes for critical aid needed by small and midsize companies
The government aid rolled out to small and medium-size enterprises, which was exhausted after only 13 days, has been problematic at best; at worst, if not changed, it will lag the survival period of many struggling businesses. The U.S. government framework is going to have to be enlarged, include more generous terms for participation and ensure that aid flows to far more smaller firms than the current oversubscribed program has accomplished to date. … READ MORE >
Bending the curve, reopening for business and avoiding the policy errors of the 1918-19 pandemic
Deaths attributed to the Covid-19 pandemic continue to mount, and data confirms that social distancing and a rigorous system of testing and tracing are necessary to slow the spread of the disease, and are working to mitigate the health crisis. Recent modeling work suggests that the slow adoption of social distancing practices as public policy and the concurrent slow adoption by individuals has increased the death toll in the United States, and will continue to do so until a vaccine or treatment regimen is developed. … READ MORE >
Fed sets up $2.3 trillion in liquidity commitments, introduces Main Street Lending Program
The Federal Reserve made history on Thursday by moving aggressively to provide up to $2.3 trillion in liquidity commitments to support the economy. This policy intends to bolster households, small and medium-sized firms, and the ability of state and local governments to float debt to ensure critical services during the pandemic. … READ MORE >
Saving small and medium-size business: temporary lending facility needed now
If the fiscal and monetary authority do not act with temporary lending relief for small and midsize companies, soon a disaster will encompass Main Street businesses through no fault of their own—this disaster is entirely preventable. … READ MORE >
Fed and Treasury create Commercial Paper Funding Facility to ease credit stress
The U.S. Treasury on Tuesday granted the Federal Reserve 13(3) authority under Dodd-Frank that permits the central bank to take steps under exigent and unusual circumstances to stabilize financial markets and the economy. … READ MORE >
The RSM Brexit Stress Index shoots up, reflecting coronavirus supply shock concern
Following the U.K.’s departure from the European Union a month ago, markets are bracing for a global health crisis and the accompanying supply shock. The RSM Brexit Stress Index — which measures financial and economic risk surrounding Britain’s departure from Europe’s common market – has shot up in the past two weeks from zero to 1.15 standard deviations above normal levels of implied stress. … READ MORE >
An improved outlook for manufacturing filtered by Boeing and the coronavirus
The RSM US Manufacturing Index implies improvement in national manufacturing sentiment in February, and we expect a similar uptick in the February ISM survey of manufacturing sentiment next month. However, February may be the last month before the coronavirus takes its toll on the global supply chain; at the same time, the Boeing shutdown will adversely impact the domestic supply chain throughout the first quarter of the year–the impact is expected to show up in both hard and soft data. … READ MORE >
Negative yields increase as global coronavirus risk proliferates
With the outbreak of Covid-19 in China in late December, a global safe haven move by investors started in earnest around Jan. 14; as a result, negative-yielding debt has jumped back to $13.96 trillion as of Feb. 26, writes RSM US Chief Economist Joe Brusuelas. … READ MORE >
As coronavirus spreads, what are the fiscal and monetary policy options?
Investors over the past few days have priced in three 25 basis-point cuts in the federal funds rate by the end of the year, with the first cut implied by the markets coming in June. This is somewhat misguided, given the nature of the global public health emergency that is … … READ MORE >