What's Inside The Senate's $2 Trillion Coronavirus Aid Package


So I'm gonna go over the two trillion dollar stimulus package some of the key elements what that looks like and the next stage is actually similar to two thousand eighteen two thousand nineteen as the fed pulled back liquidity to prevent inflation what's happened in the globe is a different inflationary environment close to Z. as close to zero inflation for an extended period as we've seen the current figure at about two percent there will be deflation in the numbers they head in other words the dollar is actually up this week on the news of the stimulus package it's an interesting phenomena because the dollar actually strengthened as the federal reserve came to the table basically with unlimited liquidity now the repo market we had referenced in December and my comment to Alex at that point was Alex there is a whole bunch of leverage in the system where they have to loan the securities or they they put the securities back to a bank they give some liquidity overnight and that means that there was too much leverage in the system and that's one reason the equity and the parts of the bond market actually had a quick selloff the quickest in history the fed was injecting and December and January literally hundreds of billions of dollars into the repo market they've opened the discount window this week they have unlimited purchases going on apparently somebody's buying a bunch of T. bills because the yield went to the minus point one one percent well that providing liquidity is in part a reaction to the highly leveraged trading that exacerbated the selloff here was the strategy that a lot of the hedge funds and trading houses were using they would go buy something paying five to ten percent in the open market certainly with price risk you don't get that kind of yield without some price risk and they have leveraged those portfolios in some cases a size fifty to one they were using the overnight securities lending market to meet their yield covenants or excuse me their liquidity and leverage covenants overnight well that excessive leverage got squeezed out of the system nearly instantaneously and it looks like it because the equity markets and parts of the bond market to overshoot the mark to go way below where they'll be in about a year so let's look at where we are in a year after we cover the coronavirus stimulus package big business about five hundred billion dollars can be used to back loans and assistance to companies fifty billion for loans to US airlines as well as state and local governments this was actually provided after nine eleven to the airlines when air travel shut down and was hamstrung if you will buy new precautions and that'll be the case for the airlines so since the loans to the airlines were provision one of the stimulus package it also leads us to where we this point next year extra precautions on air travel but at some point in the next year the final stage of the gradual resurrection for the US in the global economies will be the return of air travel with more precautions on of course the corona virus all right second provision small businesses more than three hundred fifty billion to aid small businesses and and those that may take the the form of a short term loan some of those the discussion was that they would be forgivable right or it may be just a short term loan that you can access the SBA a clearly has not gotten its arms around what to do because the legislation just went into effect hospitals a hundred and fifty billion dollar boost for hospitals other healthcare providers for equipment and supplies it's such a permitted vantage for a lot of the medical and pharma companies abit kia came out of course and said they have a fifteen minute test that can be well let's say rapidly delivered what's what's intriguing Abbott is one of just one of the companies leading the the charge and this funding of course has a much brighter future for the companies providing where that hundred and fifty billion go individuals direct payments to lower and middle income Americans twelve hundred each for for adults five hundred for each child and checks are going to go out April sixth the there are income limits of lower and middle and those income limits basically say anybody in the six figures doesn't get a check probably doesn't need a check unemployed unemployment insurance extension for four months bolstered by six hundred dollars weekly and eligibility would be expanded to cover more workers so this is pretty swift large action on the part of the federal government restrictions on business aid any company receiving government loans to be subject to a ban on stock buybacks through the term of the loan that's fair plus one additional year and they have to limit bonuses that was a nod to the left in the bill transparency the treasury department have to disclose the terms of the loans or other aid to the companies and language that would bar any business owned by president trump and his family from getting loans from the treasury business owned by members of Congress heads of executive departments and vice president Mike pence would also be blocked that seems to make sense is as well so this goes into effect providing huge liquidity what does that do in the financial markets well when we when we go to that extent what we find is that the impact on the financial markets is going to be preemption of bankruptcies of companies in two thousand eight is the U. S. banking system was rendered insolvent the key question of course was are we had a depression right and stand temporarily you could say you have a global brief depression and then a staged recovery and being able to visualize what does that look like a year from now where is permanent damage this bill goes a long way to ensuring that you don't do a permanent damage to the economy and to businesses that's a step in the right direction certainly there will be some restaurants that don't open back up by choice we heard of a hotel in Los Angeles and he just had to shut the hotel that was it for him he was in trouble before the crisis actually happened and we'll see more examples of that now clay Jenkins order this weekend that's going to be important as well what happens to Dallas County and each of the county's terra call in and the major counties around Dallas well clay Jenkins led the charge to say we got to shut down the restaurants those of you may remember that was not last Monday but the Monday before ten April third is the expiration of his first order how he updates it is going to be a key question going forward the trump administration for issue is going to issue guidelines classifying US counties by the coronavirus risk so this will be local and determined by state county and city more so than the federal government on the stage for recovery is that the right strategy we don't know we'll we'll know in about two weeks and the white house reached a deal with the lawmakers on the stimulus bill and of course that took until the end of the week to to negotiate out of federal reserve Powell says the virus will dictate when the US economy re opens but again the key intelligence part of the key intelligence from today is that's going to be in the in the month of April you start to get definitions with the final what is air travel look like when is it safe to travel and more importantly over the next year how long does it take before people are comfortable

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