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When to Restart the Economy? – The New York Times

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President Trump has a new aspiration: to “have the country opened up” by Easter, on April 12. It’s a publicly announced goal that horrifies health experts. Andrew has pieced together how the president came to side with the business-minded “we can’t have the cure be worse than the problem” crowd.

It began late last week when Wall Street executives warned the Trump administration of another Great Depression if Americans didn’t get back to work soon. Financiers like Lloyd Blankfein and Gary Cohn suggested that, based on reports coming out of China and Italy, younger people might be able to return to work sooner. None of those executives are doctors or scientists.

The White House also seized on opinion pieces like this NYT Op-Ed by David Katz, the founding director of the Yale-Griffin Prevention Research Center, that questioned the guidelines about flattening the infection curve through extreme social distancing. (Mr. Katz’s piece has been rebutted by other experts.)

A pivotal moment came yesterday when Mr. Trump and Vice President Mike Pence held a conference call with finance magnates like Paul Tudor Jones, Steve Schwarzman of Blackstone, Dan Loeb of Third Point and Ken Griffin of Citadel. Several participants urged Mr. Trump to revive the economy and suggested that the markets would be receptive to a plan to do so. Later in the day, Mr. Trump held a virtual town hall on Fox News, where he spoke about his Easter deadline.

At the heart of the debate about when to lift the lockdown is a grim calculation: Can we put a price tag on human life? It’s a crass calculation, but the trade-off between economic well-being and health is embedded — implicitly and explicitly — in many aspects of business and society.

The consensus among economists, the NYT’s Eduardo Porter and Jim Tankersley report, is that reopening soon would result in huge costs in lives lost but little in lasting economic benefits.

How much is a life worth? Regulators already make assumptions. The Environmental Protection Agency, for example, has established a cost of $9.5 million per life saved as a benchmark for cleaning up toxic waste sites. Initial research on the coronavirus in the U.S. suggests that a relatively strict government-imposed lockdown would reduce deaths by half a million people, at a cost of $2 million in lost economic activity per life saved.

• This has reopened the debate about whether the focus should be on saving years of life rather than lives — which alters the calculus, given that Covid-19, the disease caused by the coronavirus, appears to be much more deadly for older people than for the young.

• Factoring in non-virus deaths due to overwhelmed hospitals is another variable that economists are assessing, and could tilt the recommendations toward even stricter lockdowns.

At 1:30 a.m. Eastern, Senator Mitch McConnell, the majority leader, announced a bipartisan agreement on a $2 trillion stimulus package, calling it a “wartime level of investment into our nation.” It is expected to be signed into law within days.

Among the measures: an expansion of unemployment benefits, direct payments to workers, funding for hospitals and local governments, and lending programs that could backstop trillions more in funding.

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• A $500 billion fund to bail out distressed industries now comes with oversight by an inspector general and a ban on recipients buying back their own shares. (It also blocks Trump family businesses, and others tied to senior government officials, from receiving the loans.)

• A $350 billion fund for small businesses will extend loans that will be forgiven if companies continue to pay their workers throughout the crisis.

The package will blow up the budget, according to analysts at the Eurasia Group: “The U.S. is likely on pace for an annual deficit of at least $4 trillion and likely higher, in the range of 15-20 percent of G.D.P.”

The markets rallied on news that an agreement was in sight, recording their biggest one-day percentage gain since the 1930s yesterday. The rise pushed the S&P 500 back to levels seen … last Friday.

• Chaotic markets haven’t been kind to quant funds, investment firms that rely on number-crunching algorithms to generate big returns in both good times and bad. The FT and Bloomberg show how the wild market swings of recent weeks proved too much for the machines to handle.

As carriers await aid from Washington, David Gelles of the NYT talked with executives of American Airlines. The mood inside the company: fearful and frantic.

The airline is canceling 40 percent of its flights each day, and the flights that it is running — which carry just a few people — cost thousands of dollars each trip. Middle seats are blocked off to promote social distancing, planes are being sprayed regularly with antivirus chemicals, and first-class service no longer includes hot towels or nuts.

The company said last week that it had secured $1 billion in financing and $8.4 billion in total available liquidity. To save money, it has shut off coffee and water service in break rooms and is cannibalizing parked planes for repair parts.

“This is scary,” José Freig, who’s overseeing American’s coronavirus response team, told David. A bailout from Washington will help, executives said, but a fear of traveling could haunt American — and the whole airline industry — for a long time.

The co-working company’s operating model — crowding strangers into shared workplaces — runs counter to public health guidelines during the pandemic. The business is trying to figure out how to survive, as its investors squabble.

WeWork has resorted to offering employees $100-a-day bonuses to come in. The company argues that because it offers services like mail, security and storage, it qualifies as an “essential” business under New York State guidelines. But employees and customers don’t seem to agree — Peter Eavis of the NYT notes that Midtown Manhattan locations have seen little customer traffic.

Meanwhile, its biggest investors are fighting. Peter sends in this dispatch:

SoftBank, which rescued WeWork last fall, is threatening to walk away from its offer to buy $3 billion worth of company stock. It may be a tactic to pay less to other big shareholders, like Benchmark and the former C.E.O. Adam Neumann. But what happens if it follows through on its threat?

• SoftBank wouldn’t have to lend WeWork $1.1 billion in additional debt financing, a move that would unnerve the company’s landlords.

• It probably wouldn’t change who controls WeWork: Mr. Neumann has already ceded his shares to WeWork’s board, which now controls the majority of the company’s voting shares. SoftBank holds three of eight board seats, and the company’s new C.E.O., Sandeep Mathrani, holds a seat but would most likely vote with SoftBank.

• Mr. Neumann theoretically could try to regain his board seat, but we understand that’s not likely to happen.

Deals

• Facebook is said to have held talks to buy a stake in Reliance Jio, a low-cost internet service provider in India. (FT)

• The Fed asked BlackRock to direct billions in bond purchases as part of an emergency program. (WSJ)

• Executives at Apollo Global Management reportedly told investors that they were tracking 250 potential distressed-investing opportunities. (Bloomberg)

Tech

• Oracle’s Larry Ellison reportedly helped convince President Trump of the potential for two antimalarial drugs and is now working on a website to track the results of Covid-19 drugs administered outside clinical trials. (WaPo)

• Facebook is experiencing a surge in use during the pandemic. That’s not necessarily a good thing. (NYT)

• Drivers for Uber and Lyft accuse the companies of defying state laws meant to give them unemployment benefits and sick pay. (NYT)

Best of the rest

• The F.D.I.C., for whatever reason, is urging people not to keep their cash under the mattress. (@FDICgov)

• And the S.E.C. warned against a potential increase in illegal insider trading during the pandemic. (WaPo)

We’d love your feedback. Please email thoughts and suggestions to dealbook@nytimes.com.

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$71B wage subsidy 'appropriate' to keep economy afloat: Morneau – BNNBloomberg.ca

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Finance Minister Bill Morneau said the ballooning cost of federal measures being promised to workers impacted by COVID-19 is essential to keeping the Canadian economy afloat.

“I’m worried about the size of the investment, always,” Morneau told BNN Bloomberg in an interview on Wednesday. “I’m also worried about not only the numerator, but the denominator: The size of the economy. That economy is what we’re focused on at the end.”

“These are some of the biggest expenditures that have ever been done in Canadian history. We recognize that. But it’s the appropriate thing to do at this time, and once we’re through this, we will have to make sure that we get ourselves back on an appropriate track.”

Feds ‘clearly learning’ from 2008 crisis with wage subsidy: CIBC’s Tal

CIBC Capital Markets deputy chief economist Benjamin Tal praised the federal government’s $71-billion wage subsidy details announced on Wednesday, but warned that many small businesses could go under without help paying rent.

Morneau unveiled some crucial details about the federal government’s emergency wage subsidy on Wednesday, pegging the cost of the program that’s meant to cushion the blow from COVID-19 at $71 billion.

In a press conference earlier on Wednesday, Morneau said he expects funds will begin to flow in approximately six weeks, and that employers that apply will have to show their revenue fell at least 30 per cent compared to the same month last year. He confirmed that funds will be sent to employers via direct deposit from the Canada Revenue Agency.

A senior government official said during a technical briefing call that the funds could be delivered as early as three weeks, but it depends on how quick the CRA can launch the system for businesses to apply for the subsidy. 

The official added that the CRA will offer some “flexibility” to high-growth businesses that don’t have a full year of operations in place to compare a year’s worth of revenue, suggesting prior monthly sales figures could be used instead. 

Morneau said the government’s focus now has to be offering a lifeline to Canadians and Canadian businesses as soon as possible.

“I have been very focused during my time as finance minister to manage our fiscal position, to make sure we reduce our debt as a function of our economy. Well, that’s not where we are today,” he said.

“Where we are today is: I am focused on making sure people have enough money to pay for their groceries and their rent. I’m trying to make sure that we have a process that will get that money out to people rapidly.”

The revised wage subsidy program was unveiled by Prime Minister Justin Trudeau on Mar. 27 and will subsidize 75 per cent of wages for qualifying businesses up to a period of three months. It will be retroactive to March 15 and will cover the first $58,700 of salary up to a maximum of $847 per week. 

The federal government had initially planned a subsidy of 10 per cent, which was quickly panned by small business leaders as insufficient. Nonetheless, the government confirmed Wednesday that the 10 per cent subsidy will still be available to employers that don’t qualify for the 75 per cent subsidy.

Morneau added that there will be “severe penalties” for anyone who seeks to use the funds fraudulently. However, specifics on how businesses will be penalized were not announced on Wednesday. 

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China's economy may not grow at all in 2020. That hasn't happened in 44 years – CNN

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GDP growth this year in the world’s second biggest economy could sink to just 1% or 2%, down from 6.1% in 2019, according to recent estimates by analysts, including a Chinese government economist. In a worst case scenario, the $14 trillion economy may not grow at all, the World Bank warned earlier this week.
That would be its weakest performance in 44 years, worse even than the troughs hit during the 2008-2009 global recession and in 1990, when the West imposed sanctions on China after the Tiananmen Square massacre.
China is trying to revive its economy without risking more lives. The world is watching
Analysts from UBS and Goldman Sachs recently slashed their estimates for China’s growth this year to 1.5% and 3% respectively.
Even Chinese officials, who have set annual GDP targets every year since 1985, are wary of making predictions. A policymaker at the People’s Bank of China (PBOC) said this week that the government should not set a target for 2020.
“It’s difficult to even realize growth of between 4% and 5%. Many have predicted growth to fall to just 1% or 2% [this year]. These circumstances are all possible,” Ma Jun, a member of the monetary policy committee at the Chinese central bank told the state-owned Economic Daily.
Given the huge uncertainties in the outlook, China is finding it hard to determine how much fiscal and monetary stimulus to unleash, Ma said. An “unrealistic” growth target may encourage local governments to splurge on infrastructure investments, which do little to ease unemployment or improve people’s livelihoods in the short term, he added.

More help needed

Still, an official survey this week showing an anemic recovery in China’s vast manufacturing industry last month, following a collapse in activity in February, was followed by news of more stimulus measures.
China’s cabinet on Tuesday announced more than 3 trillion yuan ($423 billion) in extra financial support for small businesses.
The PBOC will provide an additional 1 trillion yuan ($141 billion) to small and medium-sized banks, and cut the amount of cash they must hold as reserves. Both measures are aimed at boosting lending to small and medium-sized enterprises (SMEs).
Previously, the central bank had injected liquidity or allocated additional lending worth more than 1.65 trillion yuan ($232 billion). The government had also allocated at least 116.9 billion yuan ($16.4 billion) in financial relief and stimulus aimed at fighting the virus.
The coronavirus pandemic could push 11 million people in Asia into poverty, World Bank warnsThe coronavirus pandemic could push 11 million people in Asia into poverty, World Bank warns
Tuesday’s announcement included a promise from the government to double “temporary cash handouts” to low-income families and the unemployed from March to June. The government didn’t specify how much it would give out, but said the move is estimated to benefit more than 67 million people.
“We believe ramping up financial relief for enterprises (especially SMEs) and households inflicted by the pandemic should be the best economic and social policies at the moment,” Ting Lu, chief China economist for Nomura, said in a note on Wednesday.
Beijing is also trying to revive the automotive industry after sales plunged 42% in January and February. The government will extend subsidies and tax breaks on electric vehicles by two years, while cutting sales tax on used cars from May through the end of 2023.
A private survey published Wednesday showed that China’s manufacturing activity expanded ever so slightly in March, as factories reopened following the easing of widespread shutdowns and travel restrictions.
The Caixin/Markit manufacturing Purchasing Managers’ Index rose to 50.1 last month from a record low of 40.3 in February. A reading above 50 indicates expansion, below 50 contraction.
The PMI data suggest the contraction in activity has bottomed out, but the economy has not recovered yet, analysts for Capital Economics said in a note on Wednesday.
China boasts massive car and aviation markets. Both collapsed in FebruaryChina boasts massive car and aviation markets. Both collapsed in February
“The [Caixin] survey suggests that just over half of firms saw conditions improve last month — implying that activity improved marginally relative to February’s dismal showing but remains very weak,” they wrote.
“The slow pace of improvement implied by last month’s PMIs is consistent with our view that China faces a drawn out recovery from the Covid-19 outbreak,” they said.

Tens of millions of jobs at risk

Capital Economics has one of the most bearish forecasts for China’s economy this year. It estimates GDP shrank by as much as 16% in the first quarter, and predicts a contraction of 3% for 2020 as a whole.
China faces two major headwinds as it tries to get back on its feet — weakening foreign demand due to the global pandemic and a potential second wave of coronavirus cases.
Nomura estimates China’s economy will grow by only 1% in 2020, causing millions of job losses.
“We estimate that slumping exports alone could lead to a loss of 18 million jobs in [the second quarter],” Lu wrote on Tuesday.
Caixin will publish its survey of activity in China’s services industry — which accounts for roughly 60% of GDP — on Friday. Whatever it shows, analysts expect the government will have to provide more help for the economy.
Tao Wang, chief China economist for UBS, said Beijing is likely to announce more support for individuals, the labor market and health care systems, more infrastructure investment, and additional cuts in interest rates.
“Moreover, we expect the government to either lower this year’s GDP growth target significantly or … [focus it] instead on coronavirus control, work resumption, poverty reduction and supporting labour market,” she said.

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‘There could be a rapid bounce back’: Experts believe economy can recover fast after pandemic – CityNews Vancouver

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VANCOUVER (NEWS 1130) – While there’s a lot of financial uncertainty for many people in the fallout from the COVID-19 pandemic, there may be reason for optimism.

At least two economists believe Canada’s economy can bounce back quickly, once the pandemic ends.

“The good news is that if the coronavirus public health issue gets resolved, I think there will be a fast recovery,” says James Brander, Professor at the Sauder School of Business at UBC. “I think the governments are doing the right things to keep in place the possibility of a fast recovery, so there’s no reason why we can’t bounce back quickly.”

The main question, of course, is when that will happen.

“There’s some reason for optimism that there could be a sharp expansion but that depends very much on the public health situation and that of course is very uncertain,” adds Brander.

Mark Thompson, professor emeritus of Industrial Relations at the Sauder School of Business at UBC agrees a fast recovery is possible.

“I mean, the economy was in pretty good shape when this all happened and I think the demand is still there and the industries that have been forced to close can reopen,” he says. “In the past, recessions we’ve had tended to be sharp but not long lasting and I think that’s what’s going to happen here.”

However, despite the glimmer of hope, both economists admit the current situation is bleak, and there will still be struggles ahead before we’re able to bounce back.

“We’re seeing a sharper downturn than we’ve seen probably since the 1930s,” says Brander. “For the past week there will be in Canada approximately 1 million jobless claims. That’s approximately double the previous record.”

Brander adds financial help coming from the federal government will help people stay afloat.

“There’s enough in place for people to survive. Not feel good, but survive for a few months and we hope that things are looking better after two or three months,” he says.

Thompson also believes help coming from some provinces and Ottawa is a good start, but thinks more will be necessary depending on how long the pandemic lasts.

“The government, I think, is acting fairly vigorously and the focus on the employees who are losing their jobs and the small businesses who may collapse if this goes on is all very good,” he says. “I don’t think anybody believes that these measures are sufficient or that there won’t be more measures required in the future.”

Thompson adds a lot of what happens in the next few months will depend on the length and severity of the crisis.

“I guess if I knew that, I would make a lot of money in the stock market or something, if I could predict the future,” Thompson says.

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