COVID-19 has put the lives of many people on hold. People all over the world are being quarantined, meaning they are not able to leave their homes, and schools and businesses are being closed. Due to these closures and the enforcement of isolation while in quarantine, more and more people are experiencing emotional and financial distress. Equally important, this pandemic is showing similarities to the 2008 recession, things are at an economic decline and people are having to cope more with anxiety and depression within this standstill.
Since 2007 economic debt has multiplied to an annual output of 165 percent from 70 percent according to Oxford Economics. Government debt has also approached 90 percent of the annual economic output, which shows a signal of distress. When in financial distress, people and businesses are forced to cut their spending habits, fueling a cycle of lost revenue. Additionally, when a person loses their job, it can also take weeks if not longer to find something new. Unemployment benefit insurance is expanding, but it won’t, by itself, prevent long-term economic damage. The president of the Washing Center of Equitable Growth, Heather Boushey said, ‘Ideally you want all those small and medium-sized businesses that were solvent and doing a great job as of Feb. 1 to still be around and able to do business when folks can get back to work.’
The latest coronavirus economy update stated that an additional 3.5 million Americans claimed unemployment benefits. Since state shutdowns began in mid-March, 27.9 million Americans have claimed unemployment benefits, there are still 23.5 million Americans waiting.
This pandemic has generated both demand and supply shocks globally. Foreign investments have fallen between 5 and 15 percent, is the lowest investment percentage, the United Nations has had since the 2008-2009 global crisis. The index of lower corporate earnings is down about 17 percent from its record high as of February 19. More companies will be impacted the longer the virus spreads.
Short-term interest rates are between 0% and 0.25%, as they were from 2008 to 2015, only now zero seems more uncertain due to the economic shock of this pandemic. Government officials have always maintained cut rates when the economy has needed it, but rate cuts won’t keep businesses from closing. While the economic crisis can’t be averted, it can be kept from becoming a financial crisis. Unlike 2008, no large banks or other institutions appear to be in danger of collapse. The fed cute the rate on direct loans by 1.5 percentage points and extended the term up to 90 days to help banks meet demands. The economy’s fate is now up to medical professionals and fiscal policy, as the Fed has enabled the federal government to borrow all it wants at extremely low-interest rates. It’s difficult to say how long rates will stay as they are due to the immense uncertainty around the pandemic and duration of “social-distancing” measures.
As in epidemiology, the basis of the financial markets, and arguments about them, is numbers-data and their deployments. Reliable data about COVID-19 has been scarce, mainly because of the lack of widespread testing. Therefore, it is unknown how many people have or have had the virus, making it difficult to determine the rate of infection and most crucially, the fatality rate. Getting the spread of the virus under control is the top priority, next would be to resume economic activity. While economic activity has been at a steady decline, the Fed’s job is to make sure businesses of all sizes have a support system through emergency lending programs, so the economy can recover more quickly. This pandemic is shaping up to be a sever and synchronized global recession into a depression, as the Fed as already purchased more than $1 trillion in Treasury and mortgage securities, $454 billion in additional funds to bulk up existing lending facilities, and $50 billion to five separate Fed lending facilities. Mr. Powell states that the timing of when economic activity can continue will be up to public-health experts, as this is a unique situation. The Fed’s policies will be extremely important when the recovery does come, and they will help to make the recovery as strong as possible.
With new rules expanding paid sick and family leave going into effect April 1, small businesses across the country are scrambling to figure out which parts of the Families First Coronavirus Response Act applies to them and how to comply. If an employee is caring for a quarantined person or a child who can’t go to school or daycare because of the pandemic, the employer must provide two weeks or up to eighty hours paid leave at two-thirds of the employee’s normal rate. The Department of Labor has said exemptions will be available if the expanded paid leave requirements would threaten the business’ viability but haven’t yet issued specific guidelines on who qualifies or how to apply. For workers taking care of a child home from school, the cap is $200 a day and $12,000 total, which includes two weeks of paid sick leave and ten weeks of the expanded family and medical leave.
Additionally, several companies suspend 401(k) matches in an effort to ‘weather the crisis’. In response to the 2008 financial crisis, 13% of companies with a minimum of 1,000 employees, suspended their 401(k) contributions and another 5% reduced their contributions. Because this was a common decision in 2008 and 2009, there’s less reluctance by 2020 employers to suspend contributions as well during this financial crisis, Ms. Napier-Joyce, an employee benefits attorney at Jackson Lewis PC said. She also stated that more companies are making plans to suspend benefits more quickly now than in 2008. Never in the history of the International Monetary Fund, has the world economy come to a standstill. The global economy lost more than $2 trillion during the 2008 financial crisis, a drop of nearly 4% from what it was before. Moreover, there’s also never been such a growing demand for emergency financing. IMF director, Georgieva states that the IMF has a $1 trillion war chest they’re determined to do whatever it takes to put it to full use and that more than 90 countries have applied for financial assistance so far.
As of March 27, a $2 trillion economic stimulus package was approved, sending most Americans up to $1,200 each to aide in the economic fallout of the coronavirus pandemic. Terrell states, “Families with an adjusted gross income of $75,000 or less in 2019 will get a one-time check for $1,200, married couples filing jointly will receive $2,400 and families will get an additional $500 for each child under 17. Individuals who earned more than $99,000 and couples who earned more than $198,000 jointly will not be eligible to receive checks.” AARP also successfully fought to grant Social Security recipients the $1,200 check and not the $600 as originally proposed. The checks will be sent the same way your 2019 tax return was filed, direct deposit, or mail. Checks have already been sent out as of right now.
Due to social distancing, officials in Maryland and Virginia have already reduced funeral attendance to ten. The restrictions have prompted some families to look to alternative ways to celebrate a loved one’s life. Some are turning to technology such as live-streaming or Web applications; others are holding private funerals with plans to have public service weeks -or months – down the road. Within this new and changing dynamic, religious leaders and funeral directors are scrambling to implement precautions that will keep mourners safe, while still reflecting religious customs and rituals and providing solace for families. Marche S. Morris, chief executive of Morris Funerals and Cremation Services, worked with one family who had a service for a loved one last week at Ebenezer AME Church in Fort Washington, Md. More than 200 people attended. A day later, Hogan’s office said that the order did not ‘Prohibit’ funerals but that funeral directors should undertake ‘Reasonable efforts’ to meet the limit. The situation with coronavirus is particularly anxiety-inducing because of the incredible uncertainty around it, says Shane Owens, a clinical psychologist in Commack, N.Y., who specializes in treating anxiety disorders. Scientific studies have found that exercise can reduce anxiety symptoms. ‘One of the greatest tools to reduce fear and anxiety is to be able to silo it off, compartmentalize it, and put it out of your mind,’ he says. Her anxiety has soared with the coronavirus outbreaks. Ms. Yakush, the writer from West Virginia, just started meditating to cope with her anxiety. She also mentions the ideology in the context of coronavirus by analyzing the communication of coronavirus conspiracy theories and news. The coronavirus crisis is an existential crisis of humanity and society; it radically confronts humans with death and fear of death. This experience can result in new forms of solidarity and socialism, or advanced war and fascism. Political action and political economy are decisive factors in such a profound crisis.
Overall, what needs to be understood is that pandemics are not just medical phenomena; they affect individuals and society on many levels, causing disruptions. Dr. Shah, Professor and Executive Vice-Chair in Psychiatry at Baylor College of Medicine states, “Stigma and xenophobia are two aspects of the societal impact of pandemic infectious outbreaks. Panic and stress have also been linked to outbreaks. As concerns over the perceived threat grow, people may start to collect (and possibly hoard) masks and other medical supplies. This is often followed by anxiety-related behaviors, sleep disturbances, and overall lower perceived state of health. Individuals with mental illness may be particularly vulnerable to the effects of widespread panic and threat.” Chronic diseases are often associated with higher levels of mental disorders. Depression rates usually soar after infection, and although studies are still ongoing on the effects coronavirus has on mental health, it’s anticipated to have rippling effects, especially on current public reactions. Additionally, lockdown and social distancing measures have heightened fears of increasing domestic violence. One of the UK’s domestic abuse charities has made 25% more reports since lockdown measures were announced. Psychiatrists are uniquely helpful in helping their patients and community to have a greater understanding of the potential impact of the virus.
With fears of a new recession and financial collapse, times like these call for resilient and strong leadership in healthcare, business, and government. Immediate relief measures need to be implemented and adjusted for those that may fall through the cracks. Longer-term planning is needed for how the economy will rebalance and re-energize. A broad socioeconomic development plan including sector by sector plans that encourages entrepreneurship so that those with sustainable business models can be allowed to flourish. The governments and financial institutions must be constantly re-assessing and re-evaluating everything to ensure that the ‘whatever it takes’ promise is truly delivered.