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| The Fed’s Message: The Money-Printing Presses Are Fired Up and Ready to Go | The Fed’s Message: The Money-Printing Presses Are Fired Up and Ready to Go |
| (about 16 hours later) | |
| The extraordinary actions of the Federal Reserve on Monday morning can be boiled down to two sentences: There is a rapidly developing shortage of dollars across the economy. And the Fed will do anything it needs to, on any scale imaginable, to end this shortage. | The extraordinary actions of the Federal Reserve on Monday morning can be boiled down to two sentences: There is a rapidly developing shortage of dollars across the economy. And the Fed will do anything it needs to, on any scale imaginable, to end this shortage. |
| Its announcement was phrased in the dry bureaucratese typical of statements from a central bank. But it contains a powerful idea. The Fed, the one entity in the world with the power to create dollars out of thin air, has every intention of doing so at whatever magnitude is necessary to try to reduce the severity and limit the duration of the coronavirus economic crisis. | Its announcement was phrased in the dry bureaucratese typical of statements from a central bank. But it contains a powerful idea. The Fed, the one entity in the world with the power to create dollars out of thin air, has every intention of doing so at whatever magnitude is necessary to try to reduce the severity and limit the duration of the coronavirus economic crisis. |
| “The Federal Reserve is committed to using its full range of tools to support households, businesses and the U.S. economy over all in this challenging time,” the statement begins. Unlike some past grand statements from central bankers promising to do “whatever it takes” to solve a crisis, this one was accompanied with actions matching the scale of the words. | “The Federal Reserve is committed to using its full range of tools to support households, businesses and the U.S. economy over all in this challenging time,” the statement begins. Unlike some past grand statements from central bankers promising to do “whatever it takes” to solve a crisis, this one was accompanied with actions matching the scale of the words. |
| It’s really two distinct crises the Fed is trying to solve, with overlapping tools. | It’s really two distinct crises the Fed is trying to solve, with overlapping tools. |
| One is an already-underway crisis in which financial markets are breaking down, failing in some of the same ways they did in the 2008 financial crisis — and thus threatening to make the economic crisis worse. The other is the threat of widespread business failures that could create mass bankruptcies, leaving millions of Americans jobless even once the virus is contained. | One is an already-underway crisis in which financial markets are breaking down, failing in some of the same ways they did in the 2008 financial crisis — and thus threatening to make the economic crisis worse. The other is the threat of widespread business failures that could create mass bankruptcies, leaving millions of Americans jobless even once the virus is contained. |
| The Fed’s new open-ended quantitative easing — signaling it will buy Treasury bonds and mortgage-related securities in whatever quantities are needed — is aimed at the first goal, of making financial markets function more like usual. In the last three weeks, financial markets have frozen up as all sorts of investors hoard cash and dump everything else. | The Fed’s new open-ended quantitative easing — signaling it will buy Treasury bonds and mortgage-related securities in whatever quantities are needed — is aimed at the first goal, of making financial markets function more like usual. In the last three weeks, financial markets have frozen up as all sorts of investors hoard cash and dump everything else. |
| A vicious cycle is underway: Fearful investors sell assets to raise cash, which drives down the prices of those assets, which spurs more fear and desire to hoard cash. That, in turn, has caused credit to dry up, or to be available only at soaring costs, for nearly everyone: corporations, state and local governments, people seeking a mortgage loan, and even, at times, the United States government itself. | A vicious cycle is underway: Fearful investors sell assets to raise cash, which drives down the prices of those assets, which spurs more fear and desire to hoard cash. That, in turn, has caused credit to dry up, or to be available only at soaring costs, for nearly everyone: corporations, state and local governments, people seeking a mortgage loan, and even, at times, the United States government itself. |
| At the very time the Fed wants to make lending more freely available to help the economy, the opposite is happening. | At the very time the Fed wants to make lending more freely available to help the economy, the opposite is happening. |
| The Fed’s response is very much in line with its actions in 2008 and 2009, which were aimed at creating a wall of money that stops that cycle. Eight days ago, the central bank announced $700 billion in bond purchases to serve as that wall. Now it is saying that could be higher, plausibly in the trillions of dollars. | The Fed’s response is very much in line with its actions in 2008 and 2009, which were aimed at creating a wall of money that stops that cycle. Eight days ago, the central bank announced $700 billion in bond purchases to serve as that wall. Now it is saying that could be higher, plausibly in the trillions of dollars. |
| For context, the initial phase of crisis response in the fall of 2008 increased the size of the Fed’s balance sheet by $1.3 trillion. Analysts at Evercore ISI estimated Monday that the increase in this episode could end up being in the ballpark of $5 trillion. | For context, the initial phase of crisis response in the fall of 2008 increased the size of the Fed’s balance sheet by $1.3 trillion. Analysts at Evercore ISI estimated Monday that the increase in this episode could end up being in the ballpark of $5 trillion. |
| But returning the financial markets to more normal functioning won’t be enough, given the peril facing American business. And that’s where the second part comes in. | But returning the financial markets to more normal functioning won’t be enough, given the peril facing American business. And that’s where the second part comes in. |
| To address the cash flow crisis that millions of companies are facing, the central bank is following a multipronged strategy to try to funnel lending on favorable terms to businesses facing trouble, with a lot of help from the United States Treasury. | To address the cash flow crisis that millions of companies are facing, the central bank is following a multipronged strategy to try to funnel lending on favorable terms to businesses facing trouble, with a lot of help from the United States Treasury. |
| Updated June 22, 2020 | Updated June 22, 2020 |
| A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico. | A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico. |
| The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth. | The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth. |
| The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave. | The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave. |
| So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement. | So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement. |
| Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks. | Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks. |
| A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study. | A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study. |
| The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April. | The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April. |
| States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people. | States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people. |
| Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days. | Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days. |
| If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.) | If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.) |
| If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others. | If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others. |
| If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested. | If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested. |
| To benefit the large companies that are able to borrow money by issuing debt on financial markets, the Fed is creating two new programs to buy corporate bonds. Another program, this one dusted off from the 2008 crisis, will pump money into lending to consumers and small businesses. | |
| Intriguingly, the Fed intends to create a “Main Street Business Lending Program” to funnel money to smaller businesses lacking access to Wall Street debt markets. The idea is that small companies can borrow money to help meet payroll, rent and other obligations during the crisis, with no interest or principal payments for six months and repayment over the next four years. | |
| A central economic challenge right now is ensuring that otherwise sound small businesses do not succumb to the crisis — that even if their revenue plummets or they must close temporarily, they can reopen when it passes and return to their productive role in the economy. Loans on favorable terms could help them do just that. | A central economic challenge right now is ensuring that otherwise sound small businesses do not succumb to the crisis — that even if their revenue plummets or they must close temporarily, they can reopen when it passes and return to their productive role in the economy. Loans on favorable terms could help them do just that. |
| These programs rely on new “special purpose vehicles,” which also include an investment from the Treasury Department. In effect, the Treasury is putting money at risk with the Fed pumping in the bulk of the money. Initially, those sums total up to $300 billion, which could reach higher if Congress gives Treasury additional capital in stimulus negotiations underway now. | These programs rely on new “special purpose vehicles,” which also include an investment from the Treasury Department. In effect, the Treasury is putting money at risk with the Fed pumping in the bulk of the money. Initially, those sums total up to $300 billion, which could reach higher if Congress gives Treasury additional capital in stimulus negotiations underway now. |
| The political situation on Capitol Hill is fluid, and some Democrats are reluctant to give the Trump administration what amounts to a blank check. And we don’t know how effective the Fed programs will be at getting money into the hands of cash-poor businesses and preventing a cascade of failures. | The political situation on Capitol Hill is fluid, and some Democrats are reluctant to give the Trump administration what amounts to a blank check. And we don’t know how effective the Fed programs will be at getting money into the hands of cash-poor businesses and preventing a cascade of failures. |
| But what is becoming clear is that the test for Chair Jerome Powell and his colleagues is no longer whether they appreciate the scale of the crisis the economy is facing. It’s evident that they do. Now it’s about making the bureaucratic details work well enough to get money where it is needed. | But what is becoming clear is that the test for Chair Jerome Powell and his colleagues is no longer whether they appreciate the scale of the crisis the economy is facing. It’s evident that they do. Now it’s about making the bureaucratic details work well enough to get money where it is needed. |