Looking at this from the perspective of a business

[Magox]

24 minutes ago, RochesterRob said:

  Even with guarantees banks are held to standards in terms of making sound loans.  A board of directors will want to know that they will not be held to any penalties in making loans that are not sound by traditional standards.  Penalties that could include fines and/or imprisonment.  Also, with the general economy twisting in the wind a couple trillion dollars will dissipate rather soon given what modern businesses are valued at.  News this morning that impacts WNY'rs is in quite a few instances milk is not being picked up from dairy farms.  This is a loss of income plus nearly all dairies have commercial debt that they now will have great difficulty servicing.  Who gives the OK in the federal government to roll loans over indefinitely which is a violation of maintaining loan quality in normal times?  Let dairies fail and the value of assets falls greatly reducing the solvency of other remaining dairies.  In my mind "W"s and swooshes are all cubicle talk by people who have no idea as to how the economy functions outside a classroom looking at non-realistic variables.

 

You very well may be right, but to my understanding this is going to be done in a much more expedited process than your standard bank loan.  So I strongly believe that the loans will be approved with considerably less stringent guidelines than in normal times.

 

 

Quote

 

Q: When will the new funding be made available to small businesses?

Treasury Secretary Steven Mnuchin said Monday that small business loans will be made available starting Friday. That goal was again confirmed by SBA officials as of Wednesday morning. Detailed application guidelines are also available on the Small Business Administration’s website.

 

The initial crush of applications will be limited to small businesses and non-profits, regional SBA administrator Steve Bulger said in an interview Wednesday morning. Loans for sole proprietors and independent contractors will see at least one week of delay.

Mnuchin and other administration officials say they are setting up a system in which borrowers will be able to receive funds on the same day they submit an application. Since the initial steps of the approval process will be handled entirely by the lender, there is no separate review being conducted by the SBA.

“The application has been really stripped down from what we normally use in the SBA,” a senior administration official said Tuesday.

 

 

[RochesterRob]

12 hours ago, Magox said:

 

You very well may be right, but to my understanding this is going to be done in a much more expedited process than your standard bank loan.  So I strongly believe that the loans will be approved with considerably less stringent guidelines than in normal times.

 

 

 

  Did not catch the full story but speculation is out there that a lot of companies will evaluate payroll in terms of less expensive options i.e. younger workers.  Older workers could suddenly be thrown into early retirement far sooner than expected.  Some may not be in a position to weather early retirement in terms of maintaining their home, vehicle, and kids' college if they are only 45-50 years old.  I would imagine that quite a number were expecting to hang on until their mid 60's.  We will have to see how this all progresses over the next year.

[Magox]

5 hours ago, RochesterRob said:

  Did not catch the full story but speculation is out there that a lot of companies will evaluate payroll in terms of less expensive options i.e. younger workers.  Older workers could suddenly be thrown into early retirement far sooner than expected.  Some may not be in a position to weather early retirement in terms of maintaining their home, vehicle, and kids' college if they are only 45-50 years old.  I would imagine that quite a number were expecting to hang on until their mid 60's.  We will have to see how this all progresses over the next year.

I am sure some of that will be happening.   I’m still not sure what the mechanism they will use to ensure that all their employees are kept on the payroll post loan.   Do they audit the books? Do they require companies to show proof that they maintained payroll?   I still hadn’t heard about that

[Westside]

On 4/1/2020 at 3:13 PM, Gary Busey said:

I own a seasonal business and will not take a loan to open up early and pay my employees for April through whenever when I will not be able to do business. Luckily all my employees except one (Full time - still getting paid) are part time and understand why I have not opened.

How many employees can a lemonade stand have? Lol

I'm just busting your chops. Good luck with your business. ?

[Tiberius]

Just a historical point. We bombed Japan into rubble. Almost every city was smashed, massive numbers of its people killed, yet it rose from the ashes to become the second biggest economy in the world for awhile. We have great people in this country and will bounce back eventually, probably relatively quickly. Human capital is the moist important factor in an economy and we have a huge supply of smart, hard working young people. 

[SoCal Deek]

30 minutes ago, Tiberius said:We have great people in this country and will bounce back eventually, probably relatively quickly. Human capital is the moist important factor in an economy and we have a huge supply of smart, hard working young people. 

Tibs? Is that you? So there is another side of the bed you can get up on! Thank you my friend for the single best post I’ve ever read from you. Well done! ?

[TPS]

I have a difficult time imagining "recovery" at this point. I'm more worried about how slowly the current $ is being rolled out, like RochB.  I think there will be some "changes on the fly" as they run into difficulties.  Articles yesterday about banks not wanting to participate in the SBA program, taking 6-8 weeks to get payments to individuals that can't get it electronically, and others.  All of these will weigh on any "recovery."  I imagine it will take a long time for people to feel comfortable in public spaces again.  Will you have to show your test results before you enter the Cap?  We are dealing with so much uncertainty, any "recovery" will be totally dependent on what the government does....so....what are some things it should do?

 

It will require viewing this situation as if it's a war-time setting. Before I make some suggestions, let me try to reiterate a concept that I've discussed here often, but apparently still hasn't sunk in--MMT.  The federal government doesn't borrow what it spends into existence.  Under the current "rules of the game," the spending in excess of taxes creates the deposits and reserves in the banking system that can then be used to purchase the bonds sold by the Treasury.   The government's constraint is not how much it can spend, rather the available real resources it can put to use by its spending.  Right now those resources are significant and growing...

So, for the US, there is no question about "how you pay for it," rather the government can spend whatever congress passes, only limited by the resources available.  Under current law, the Treasury has to sell bonds equivalent to the deficit, and those bonds are bought by the banking system from the deposits/reserves received by government spending.  There is a workaround, the Treasury does have the power to mint coin, and in my circles there has been talk about minting a $1 trillion platinum coin to "fund" the spending.   Regardless, some things I think should happen after the next 2-3 months:

1. Something akin to Yang's UBI of $1,000 per person,phased out with higher incomes. We'll need to make sure the poor and unemployed can eat and have a place to sleep, else society will crumble...

2. Relatedly, some kind of public-private employment partnership focused on ***** health practices.  We are going to need a shitload of people to clean and disinfect public/private places, and that cost should not be placed solely on the private sector.  New Era's seats will need to be disinfected before every game...These jobs should pay a level above the UBI, and the more people doing this, the less receiving UBI.

3. We will have to figure out a way to ensure everyone has health insurance. 

4. An infrastructure bill is a good idea, and should be part of the overall post-crisis stimulus--not sure on the $ amount given all these other proposals.

5. Ensure the food security of the nation.  The federal government should do everything it can to ensure the domestic food supply chain stays whole, and the rest of the world will also need our surplus of grains.  Pick up that milk!

6. An industrial policy that is focused on ensuring we have the domestic supply capacity to meet this type of crisis in the future.  This would be similar to what trump is doing in the trade war, but instead mandate a level of domestic production for essential products. 

7. Eliminate a significant proportion of outstanding student loan debt.  These are the people who are in their prime years of spending, and spending that goes to debt repayment does next to nothing for the real economy. 

 

So, my somewhat random thoughts on how to ensure we transition as quickly as possible, but we'll never get back to how things were.....

 

[shoshin]

2 hours ago, Tiberius said:

 Human capital is the moist important factor in an economy and we have a huge supply of smart, hard working young people. 

 

  

Edited April 3, 2020 by shoshin

[3rdnlng]

1 hour ago, TPS said:

I have a difficult time imagining "recovery" at this point. I'm more worried about how slowly the current $ is being rolled out, like RochB.  I think there will be some "changes on the fly" as they run into difficulties.  Articles yesterday about banks not wanting to participate in the SBA program, taking 6-8 weeks to get payments to individuals that can't get it electronically, and others.  All of these will weigh on any "recovery."  I imagine it will take a long time for people to feel comfortable in public spaces again.  Will you have to show your test results before you enter the Cap?  We are dealing with so much uncertainty, any "recovery" will be totally dependent on what the government does....so....what are some things it should do?

 

It will require viewing this situation as if it's a war-time setting. Before I make some suggestions, let me try to reiterate a concept that I've discussed here often, but apparently still hasn't sunk in--MMT.  The federal government doesn't borrow what it spends into existence.  Under the current "rules of the game," the spending in excess of taxes creates the deposits and reserves in the banking system that can then be used to purchase the bonds sold by the Treasury.   The government's constraint is not how much it can spend, rather the available real resources it can put to use by its spending.  Right now those resources are significant and growing...

So, for the US, there is no question about "how you pay for it," rather the government can spend whatever congress passes, only limited by the resources available.  Under current law, the Treasury has to sell bonds equivalent to the deficit, and those bonds are bought by the banking system from the deposits/reserves received by government spending.  There is a workaround, the Treasury does have the power to mint coin, and in my circles there has been talk about minting a $1 trillion platinum coin to "fund" the spending.   Regardless, some things I think should happen after the next 2-3 months:

1. Something akin to Yang's UBI of $1,000 per person,phased out with higher incomes. We'll need to make sure the poor and unemployed can eat and have a place to sleep, else society will crumble...

2. Relatedly, some kind of public-private employment partnership focused on ***** health practices.  We are going to need a shitload of people to clean and disinfect public/private places, and that cost should not be placed solely on the private sector.  New Era's seats will need to be disinfected before every game...These jobs should pay a level above the UBI, and the more people doing this, the less receiving UBI.

3. We will have to figure out a way to ensure everyone has health insurance. 

4. An infrastructure bill is a good idea, and should be part of the overall post-crisis stimulus--not sure on the $ amount given all these other proposals.

5. Ensure the food security of the nation.  The federal government should do everything it can to ensure the domestic food supply chain stays whole, and the rest of the world will also need our surplus of grains.  Pick up that milk!

6. An industrial policy that is focused on ensuring we have the domestic supply capacity to meet this type of crisis in the future.  This would be similar to what trump is doing in the trade war, but instead mandate a level of domestic production for essential products. 

7. Eliminate a significant proportion of outstanding student loan debt.  These are the people who are in their prime years of spending, and spending that goes to debt repayment does next to nothing for the real economy. 

 

So, my somewhat random thoughts on how to ensure we transition as quickly as possible, but we'll never get back to how things were.....

 

Why? Unless events are scheduled very close to each other why would you spend the money to disinfect something that has no active virus on it? While some of your thoughts have some merit it seems like other answers are closely aligned with Nancy Pelosi's most secret desires. I'm surprised you didn't suggest vote harvesting or new airline fuel and environmental standards in order to battle this pandemic. 

[Magox]

On 4/2/2020 at 10:00 AM, Magox said:

As is being discussed in another thread, 

Just to add more context to the L, W, V and Nike Swoosh recoveries:

 

V - Recovery

 

The likelihood of a V shaped recovery is virtually Nil.    A V shaped recovery means that the economy will be right where it left off before the downturn within a short-time period of let's say less than a year.  The reason why we won't see a complete V is because there will be businesses that will be permanently closed.   And although at some point those businesses will be replaced, that doesn't take place overnight. Here is a report out of Michigan where they estimate 1/3 of all restaurants will permanently close.  

 

 

Which is why I am saying that the longer it takes to get people back to work, the more of these sort of businesses that will be permanently closed which thereby means it takes longer to recover back to pre CoronaVirus downturn.

 

W - Recovery

 

 

Basically what would need to happen here is that we relax the social distancing measures either too soon or the effectiveness of controlling the outbreak once we begin to phase in the workforce gets out of hand, therefore leading the economy to dip right back down again.  

 

L - Recovery

 

 

 

For me this is the likely bad case scenario.  Where we begin to phase in the workforce beyond June.  That's not to say that you would have a profound L shape if we began in July, but the further we push it out and the more stringent the Social distancing policies post "flattening the curve" and phasing in the workforce, the more that L shape takes place.  It just basically means that we dug a really deep hole and lots of businesses will be permanently shuttered or seriously impaired and it takes time to get the country back to whole after such a deep downturn.  Which is why the Relief bill was so important, at least in theory.   That bill was so that many of these small businesses and corporations can either retain their workforce or rehire them almost immediately.

 

Nike Swoosh Recovery
 

 

 

For me this is the optimistic case.  I think it's 50% chance this, 40% chance L shaped, 5% V shaped and 5% W shaped.

 

The Nike Swoosh is where we get to begin phasing in the workforce relatively soon, hopefully by June.  Where the curve has been flattened in just about all places in the country.  And all the measures that are needed to contain future outbreaks are in place with solid social distancing policies and the economy snaps back initially and then takes about another year after the initial snap back to get back to whole. Most likely around 18 months or so.

 

 

 

Which leads me to the Infrastructure Bill.  The more EFFECTIVE Stimulus that can be added by the Federal government, the quicker the recovery will be.  Which means millions of more people will go through less suffering.  And there is no better time to borrow that money than now.  That is a fact.  The interest rates will never be as low as they are today....If there ever was a time to borrow a fukton of money to make the economy whole, now is that time.

 

Update on this prediction.

 

We are moving a lot more rapidly than expected.

 

I still don’t see a V because of the permanent shudder of businesses.  However the hole may not be as deep as feared and the reopenings began a little sooner than estimated.

 

Upgrade on Nike Swoosh and V recovery.  Downgrade on L