UNIVERSIDAD DE LOS LLANOS

CENTRO DE IDIOMAS

“Comunicación universal a su
alcance”

STUDENT : _________________________________________ DATE: __________

TEACHER: RICARDO VALENCIA MUELAS

The Covid-19 economy, explained .

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The Corona virus pandemic has tanked the global economy with unprecedented
speed.Millions out of work markets, plunging business slammed to a screeching halt.
Here's what you need to know to understand this economic turmoil we're living through.
The Corona virus pandemic isn't just raising the specter of recession. Economists are
worried about the possibility of something even worse.
Everybody stays home for six months. Then you know, it's hard to. It's going to be like the
Great Depression.
So, what's the difference between a recession and a depression? It comes down to how
long the economy contracts. A recession is typically defined as two negative quarters of
economic growth and as part of the normal business cycle. US economy has fallen into
recession more than 30 times since 1854. A depression is something vastly different, it
happens when the economic decline is sustained and might potentially go on for years,
and that's only occurred once in American history in 1929 and it lasted 10 years because it
lasts so long. A depression is more severe, a decade ago, unemployment hit 10% during
the worst of the Great Recession but during the Great Depression, the jobless rate peaked
at nearly 25%. The reason economists are so worried this time? We just don't know how
long will be fighting this virus. We don't know how long stores will be shut down, how long
travel will be paused, how much damage will be done to supply chains, or how many
companies will go bankrupt but there is help if you look to history. The recession that
followed the 1918 Spanish flu pandemic lasted just seven months, that's much shorter
than the average recession. Let's hope this time history repeats.
A record shattering. 6.6 million Americans filed for unemployment last week. That's on top
of the 3.3 million who filed the week before joining us. Now, seeing a chief business
correspondent, Christine Romans, CNN anchor and correspondent Julia Chatterley, and
CNN White House correspondent John Harwood Romans once again just the top line
number double what it was last week. I think higher than the worst we even expected for
this week.
Yeah, it really is a job shock here, and you've got 10 million layoffs or furloughs that means
in just the past couple of weeks. 10 million it's pointless for me even to make a chart of it
for you, John, because it just looks like a geyser going straight up. I'm actually even a little
surprised that the state unemployment offices were able to handle this kind of volum.
Last week we know there were so many people filing for unemployment benefits, they
weren't even in some cases able to get all of them. Another notable thing about these
numbers from the Department of Labor, John, is that the numbers doubled and it has
spread from hospitality and restaurants into just about every corner of the economy,
including a health care.
The biggest Main Street bailout in history will soon work its way into your bank account,
and there are important features for American workers and savers. First that check up to
$1200 for individuals, $2400 for couples and $500 per child. This is a one time payment
that for most people, will be direct deposited into your bank account. If you file tax
returns electronically with the government in 2018 and 2019. If you have to wait for a
paper check, it could take a little longer. There are also better jobless benefits. An extra
$600 a week for up to four months and gig economy workers. The self-employed are
included for the first time.For retirees, required minimum distributions are waived for
2020, that means seniors don't have to take money out of their retirement accounts and
take a loss. It gives your nest egg more time to recover if you don't need the money right
now. For taxpayers in extreme distress, the Cares Act waives the 10% early withdrawal
penalty on distributions from IRA 401K and certain retirement accounts and annuities.
And if you already have a loan outstanding on your retirement plan and repayment is due
this year, you can delay your repayment up to a year. For student loan borrowers,
repayment and interest on all federally backed student loans has been suspended for six
months until September 30th and the Department of Education can't collect on defaulted
loans by garnishing wages or tax returns.
Stay at home. It's the mantra of the fight against coronavirus. But as job losses mount,
more people are struggling to make payments on those homes. The federal government
has taken some action.
What is housing have do with health? It has everything to do with healt?.
Evictions and foreclosures are halted for those with federally backed mortgages. The $2
trillion stimulus package includes a 60 day suspension for Housing and Urban
development properties and single family mortgages insured by the Federal Housing
Administration as well Fannie Mae and Freddie Mac, but that's only about 60% of all
mortgages. For everyone else, it may come down to a patchwork of stopgap measures.
Bank of America announced it would allow customers to defer mortgage payments for
those who request it, but other major banks have not yet made such broad assurances.
Kansas, California, Indiana, and several other states have suspended all foreclosures and
evictions temporarily, while New York ordered a halt on all mortgage payments for the
financially distressed for 90 days. And what about the 36% of Americans who rent the
stimulus package includes a direct payment to those who meet certain income
requirements up to $1200 for individuals, $2400 for couples, and $500 per child, but a one
time payment won't go very far. That's where the stimulus bill's expanded unemployment
insurance comes in. Not only does this jobless insurance pay more and last longer, it also
covers independent contractors, gig economy workers, and the self-employed.
What we call unemployment. Insurance on steroids. It goes longer that that. First check is
nice, but how are you going to pay the rent to pay by the food and do things in the
months after? If you're still unemployed, the unemployment lasts for four years and it's
larger. It's more money because it pays you. For most workers, their full salaries.

Landlords can seek relief if they have a federally backed loan, but also tenants cannot be
evicted for non payment for 120 days. This applies to some 27,000 properties financed
through Freddie Mac. Remember, if you're behind on your rent or mortgage, contact your
lender or landlord. Don't wait, work out a plan with them now. And of course, deferred
payments mean you'll still have to pay them eventually while adding a few months at the
end of a 30 year mortgage may be a reasonable solution for renters required to pay back
rent, that story could be very different.

I'm worried about having a heart attack.

To be perfectly honest with you.
I'm concerned government needs to react and help us get through this.
That's the only way it's going to work.
Small businesses have been ravaged by the coronavirus and the economic chaos it has
caused. Now the government is ready to help. The stimulus package allocates almost $350
billion for forgivable small business loans. Who is eligible for those funds? Generally any
business with 500 employees or les, that includes independent contractors and sole
proprietors. The loans are designed to keep businesses afloat. Businesses are eligible for 2
1/2 months of payroll costs based on the average cost from last year and the loans do not
have to be paid back as long as owners meet a few conditions. The loan must be used
within two months and cover payroll, mortgage, interest, rent and utility costs. The
recipient can't layoff workers or reduce their pay. If a business has already let workers go,
it can use the loan to hire then back.75% of the money must go to payroll costs to get the
loan. There's a two page application that can be filled out online. You can plug your zip
code into the Small Business Administration website to find a lender in your area. The
White House is promising to move quickly on these funds, but some banks say the details
aren't quite worked out yet and that may cause delays. The money will be given out on a
first come, first serve basis, so visit treasury.gov to get more information and the
application. Of course, some big questions remain. Will the funds be enough to keep small
business on their feet? And what if the pandemic stretches well into the future? If that
happens, the government may need a new package with more capital to help small
businesses survive.
Reserve is battling a coronavirus fueled recession. It cut interest rates to near 0.
And I want to congratulate the Federal Reserve. It's a big step and I'm very happy they
did.
It announced unlimited bond buying and injected more liquidity into financial markets.
The Fed also says it will purchase commercial mortgage backed securities, but what if it's
not enough? There's some talk about the Fed even buying individual stocks. The central
bank would likely need the law change to allow that. Negative interest rates are another
possibility. Other global central banks have gone negative and President Trump likes the
idea. But Fed chief Jerome Powell has pretty much ruled that out?
We do not see negative policy rates as likely to be an appropriate policy response here in
the United States.
There are other unconventional tools the Fed could use. Section 13, three of the Federal
Reserve Act grants the Central Bank emergency powers. Experts argue that includes the
authority to lend directly to companies hit by the economic shock of coronavirus. And the
Fed says a Main Street lending program for small and medium sized businesses is coming.
Then there's perhaps the last resort. Helicopter money picture a helicopter flying
overhead, throwing cash down on everyone. Former Fed chief Ben Bernanke famously
talked about this in 2002. Under this scenario, the government makes money directly
available to consumers to spend, but it doesn't pay for it by borrowing, which adds to the
deficit. Instead, it's paid for by the Fed, which essentially prints money. It's a theoretical
idea. Never done before, but if the Fed's actions up to now don't work, the governments
around the world could move to grant central banks new powers.
How quickly can the economy recover from coronavirus? A lot depends on what shape
this recession takes. There's an alphabet soup of possibilities. the V shape, EU shape, or
the dreaded L shape. AV shape is the best case scenario here. It's a sharp drop followed by
an equally sharp recovery. It means the economy would ramp back up just as quickly as
it's shut down, but that will largely depend on how quickly the virus is contained. And how
soon people can go back to work? That's why U shaped recovery may be more likely here.
In that case the economy contracts then bumps along the bottom for a while before
climbing back. Many economists are betting on that scenario since uncertainty caused by
the virus won't just evaporate overnight. Business owners and CEOs make her tail future
investment and consumer spending. The biggest driver of U.S. economic activity probably
won't bounce back immediately either. That's partly because of lost income, but also
because of the psychological toll. The viral outbreak has taken on consumer confidence
beyond the V and the you there's the worst case scenario. The L shape picture a hockey
stick with a long tail that happens if the virus is not contained, social distancing remains
into the summer and businesses and consumers take years to recover after the Great
Recession and economic activity took nearly four years to return to its pre recession peak.
The Great Depression was even more severe, lasting 10 years. Thankfully, most
economists are not. Predicting this outcome. But all of this is highly uncertain and it all
depends on the biggest unknown. The course of the virus.