The economic damage from the coronavirus pandemic will be unprecedented, according to Ray Dalio, the head of one of the world’s largest hedge funds.
Ray Dalio says global corporate losses from the pandemic will amount to $12 trillion.
Dalio told CNBC: “What is happening has not happened in our lifetime before … What we have is a crisis. There will also be individuals who have very big losses … There is a need for the government to spend more money, a lot more money … A lot more people are going to be broke.”
Talking about the U.S. corporations, he said they will lose as much as $4 trillion.
The founder of Bridgewater Associates explained that the U.S. fiscal stimulus package should be $1.5 trillion to $2 trillion at a minimum, depending on the form of financial relief such as loan guarantees and credits.
Dalio said there is an “inability of central banks to stimulate in a way that is normal.” They have less capacity to ease monetary policies when interest rates have already hit the floor, he added.
The investor said: “We are now at a point where there will have to be a debt restructuring and a monetization of that. We are living in a different world like the 1930s in which you have a devaluation of the dollar. You have the printing of money.”
The White House has announced this week a $1 trillion stimulus package that could help soften the blow of a sudden recession. The funds will include direct payments or tax cuts and small business assistance.
The Federal Reserve has also unveiled plans to pump an additional $1 trillion into the U.S. economy through asset purchases and cut interest rates to zero.
European stocks surge following governments’ efforts to mitigate economic impact
European stock markets opened sharply higher on Friday as more central banks adopted monetary and fiscal measures to deal with the economic downturn as a result of the pandemic.
Stocks in London jumped in early trading with the FTSE 100 index rising over five percent. Germany’s DAX is gaining over six percent, while French stocks are also up by over six percent.
The pan-European Stoxx 600 jumped 4.8 percent in early trade, with oil and gas stocks surging 8.5 percent to lead gains after oil prices enjoyed their strongest day ever on Thursday.
Asia-Pacific
Asia-Pacific markets have also entered positive territory, led by almost five percent gains for both Hong Kong’s Hang Seng and South Korea’s Kospi. India’s Mumbai Sensex is gaining over four percent. China’s Shanghai Composite closed 1.61 percent higher.
U.S.
After a volatile week of trading, global stocks have started recovering from their huge losses, with the U.S. Dow Jones index rising 100 points on Thursday.
The stock market surge comes amid monetary and fiscal support from governments around the world.
The European Central Bank, U.S. Federal Reserve and the Bank of Japan have all announced stimulus packages to support the markets. The Bank of England has also launched a substantial bond-buying program this week and issued further emergency cuts to interest rates.
Thursday
U.S. markets swung wildly on Thursday after plunging 30 percent from their peak.
The failure by Western countries to contain the pandemic is bringing global business to a halt and causing panic among investors.
The Dow Jones Industrial Average opened down over three percent before recovering earlier losses. The S&P 500 was also in positive territory after losing three percent at the start of trading. The Nasdaq Composite tech index started one and a half percent lower, but later it rose up.
Trump’s law won’t benefit millions
Social distancing – stay at home – could be challenging for the 24% of American civilian workers who lack any sort of paid sick leave.
If they skip work because they are feeling ill or because their children’s schools have closed because of coronavirus, they will miss paychecks. If they go to work sick, they risk spreading coronavirus to their coworkers and customers.
House Democrats attempted to pass legislation that would have provided full-time employees with seven paid sick days on a permanent basis, and 14 additional paid sick days to be used during the duration of the current public health emergency.
They came up short. House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin held marathon talks about the contents of the Families First Coronavirus Response Act, but multiple House aides previously told that the paid sick leave provisions were a sticking point.
Early Saturday, the House passed a version of the bill that includes some temporary paid sick leave provisions, but also includes exemptions that will disqualify millions of Americans.
The Senate subsequently passed the amended legislation on Wednesday, and President Donald Trump signed the bill into law hours later. President Trump signed the bill into law on Wednesday night, and the paid leave provisions are supposed to take effect within 15 days.
An expanded Family and Medical Leave Act will provide government employees and those who have worked for companies with fewer than 500 employees for at least 30 days with 10 weeks of emergency paid leave to care for children whose schools or daycare facilities were closed.
Quarantined workers, or those who were caring for afflicted family members, will not be eligible. Healthcare providers and other first responders can also be excluded. After 10 days of unpaid leave, an employer will pay an employee no less than two-thirds of the employee’s usual pay — up to $200 per day, and $10,000 in total.
The legislation stipulates that the Department of Labor can exempt businesses with fewer than 50 employees from providing workers with paid emergency leave “when the imposition of such requirements would jeopardize the viability of the business.”
About 12 million private sector employees work for companies with fewer than 50 employees.
Companies with more than 500 employees are also excluded from the paid leave mandate.
The Bureau of Labor Statistics reported about 59 million people worked for companies with more than 500 employees in 2019 — approximately 6.5 million of those people did not have access to paid sick leave.
In light of COVID-19 concerns, however, some large companies have decided to provide paid leave on their own in recent weeks.
Companies with less than 50 employers who wish to apply for an exemption to the paid leave mandate because they think it would “jeopardize the viability” of their business can reach out to the Department of Labor.
Though the original version of the Families First Coronavirus Response Act included a permanent paid sick leave benefit that would have enabled workers to accrue seven days worth of paid sick leave, the sick leave benefits included in bill that passed the House and Senate will only last through December 31, 2020.
Paid Leave For All Director Dawn Huckelbridge says she is disappointed as more workers are not eligible for the benefits, but still sees it as a positive first step toward more inclusive paid leave legislation.
SIGN UP FOR COUNTERCURRENTS DAILY NEWS LETTER
