How Big Is A Trillion Dollar Stimulus Program?

davfor

This short report includes some interesting statistics:

Treasury Secretary Mnuchin has reportedly requested $850 billion to combat the economic effects of the virus. Were this request to be met, it would amount to about 4% of U.S. GDP. For context, the stimulus bill passed in February 2009 was about 5.5% of U.S. GDP.

During the Great Recession, the federal budget deficit peaked around 10% of GDP.

During World War II, the federal budget deficit peaked at nearly 30% of GDP in 1943, and was more than 20% each year in the 1943-1945 period (middle chart). A federal budget deficit of 30% of GDP today would amount to nearly $7 trillion.

https://fxstreet.com/analysis/whats-happening-on-the-fiscal-front-202003171746

WABAC

Oh.

Well.

My snarky answer is that it seems to be big enough to raise yields on the ten year bonds.

davfor

WABAC said:

Oh.

Well.

My snarky answer is that it seems to be big enough to raise yields on the ten year bonds.

this is interesting to me because it provides a sense for how much ammunition the federal government may wind up using.

WABAC

davfor said:

WABAC said:

Oh.

Well.

My snarky answer is that it seems to be big enough to raise yields on the ten year bonds.

this is interesting to me because it provides a sense for how much ammunition the federal government may wind up using.

I can see 10%. It's an election year.

The rest depends on how/when/whether the virus burns out.

But I can also see more trouble with interest rates.

davfor

WABAC said:

davfor said:

WABAC said:

Oh.

Well.

My snarky answer is that it seems to be big enough to raise yields on the ten year bonds.

this is interesting to me because it provides a sense for how much ammunition the federal government may wind up using.

I can see 10%. It's an election year.

The rest depends on how/when/whether the virus burns out.

But I can also see more trouble with interest rates.

Yes. I have thought for a while that it would take extensive global deficit spending to break the back of our low-interest-rate world. If this pandemic turns out to be long-lasting enough, this event might just do it.

WABAC

davfor said:

WABAC said:

davfor said:

WABAC said:

Oh.

Well.

My snarky answer is that it seems to be big enough to raise yields on the ten year bonds.

this is interesting to me because it provides a sense for how much ammunition the federal government may wind up using.

I can see 10%. It's an election year.

The rest depends on how/when/whether the virus burns out.

But I can also see more trouble with interest rates.

Yes. I have thought for a while that it would take extensive global deficit spending to break the back of our low-interest-rate world. If this pandemic turns out to be long-lasting enough, this event might just do it.

And the world says: Show me the cash!

Yields on government bonds in most major economies including the U.S., Japan and across Europe rose sharply Wednesday, while investors sheltered in the shortest-term government debt and cash.

The yield on the U.S. 10-year Treasury note rose to 1.220% from 0.994% Tuesday as bond prices tumbled. The yield on the one-month U.S. Treasury bill briefly turned negative for the first time since 2015. Gold fell 3.1%.

Derf

@WABAC; thanks for the link. I came across this in the read.
"Now that they've gotten around to U.S. Treasurys, that tells you that legitimately nothing is safe," he said. "There's no place to hide other than cash."
Yes cash, at least you can have some TP !
Derf

WABAC

de nada.

johnN

Trump Seeks $500 Billion in Checks for Taxpayers
The administration is proposing two waves of checks to individuals and another $500 billion for small and large businesses as part of its economic response to the coronavirus pandemic.

https://www.nytimes.com/2020/03/18/us/politics/donald-trump-coronavirus-trump-stimulus.html


Is he trying to woo voters and put money into tax payers

davfor

Here are a couple of articles that bear on this topic.

The first suggests a trillion dollars may prove to be just a drop in the bucket compared to what may eventually be needed:

But many analysts believe the current stimulus figure is based on an unrealistic assumption that normal life will resume in a matter of weeks when it actually may take months to flatten the virus curve and develop treatments and then even longer for a vaccine.

https://politico.com/news/2020/03/20/why-coronavirus-stimulus-may-not-be-enough-138368

The second includes discussion of a pandemic model that looks to the 1918 pandemic for guidance....it suggests any projections regarding the eventual dollar amount required need to account for the possibility of a multi-wave event:

Like the bumpy hills some foresee in coming months, the 1918 pandemic hit America in three waves — a mild one that spring, the deadliest wave in fall and a final one that winter.

With each wave came a cycle of denial, devastation, community response finally kicking into overdrive — followed by finger-pointing and blame among leaders and the public.

https://washingtonpost.com/health/2020/03/19/coronavirus-projections-us/

(Note: These pandemic models can also usefully be considered when making decisions regarding personal investments.....)

Mark

Not big enough if you make less than $40K a year it seems.

"The legislation would provide checks of $1,200 per adult for many families, as well as $500 for every child in those families. Families filing jointly would receive up to $2,400 for the adults. The size of the checks would diminish for those earning more than $75,000 and phase out completely for those earning more than $99,000. The poorest families, those with no federal income tax liability, would see smaller benefits, though the minimum would be set at $600.

Limiting the payment amount for those without federal tax liability was a change from the original White House proposal, and caught some Republicans off-guard, provoking criticism. Sen. Josh Hawley (R-Mo.) tweeted: “Relief to families in this emergency shouldn’t be regressive. Lower income families shouldn’t be penalized.”

An early analysis showed the vast majority of middle class people would receive the cash payment, but the percentage doing so falls dramatically toward the bottom of the income distribution. About 22 million people earning under $40,000 a year would see no benefit under the GOP plan, according to an initial analysis by Ernie Tedeschi, a former Obama administration economist."

Senate Republican Proposal