Interest-free lending is the best way to save the economy

The New York Times reported that it was a better way than giving each American $ 1,000 as President Donald Trump suggested.

“It takes time to solve the Covid-19 crisis by science, but we need to deal with the economic crisis right now,” the expert Andrew Ross Sorkin, the head of Squawk Box article of CNBC, wrote in New York Times.

The expert Sorkin said that there is a better way than proposing $ 1,000 for each American and supporting industries such as aviation of President Donald Trump.

It is the government that can provide all US businesses, from small to large, interest-free bridging loans that were guaranteed during the crisis and require repayment within five years.

Protection of workers

The only condition for businesses is that they must continue to use at least 90% of the labour force with a constant wage compared to before the crisis took place.

And the employee who was laid off in the last 2 weeks can go back to work. The program will help companies – from airlines to restaurants -will active and workers will not lose their jobs.

At that time, workers believed that life would return to normal after the epidemic was under control. The program also encourages people to work from home, ensuring “maintaining a social gap” without fear of losing their jobs.

“The cost of this measure? Extremely large. The US government will have to lend trillions of dollars if the crisis lasts for 3 months, even reaching the $ 10,000 billion. This figure is equivalent to 50% of US GDP”, the expert Sorkin said.

Assuming that 20% of the loans are not repaid, the US government will lose hundreds of billions to trillions of dollars of taxpayer money. However, Sorkin said that leaving the US economy vulnerable would cause many terrible losses.

“The size of the current rescue packages is too small and launched too late. Moreover, focusing on rescuing a number of specific industries and businesses will lead to suspicions and anger.” The expert Sorkin emphasized.

In the past few days, some MPs have questioned that rescue economic packages that must bring specific benefits for each American worker and their family, instead of corporations or companies.

Need jobs

However, the expert Sorkin explained that giving cash to individuals and households will not bring the necessary effect. “Workers don’t need cash. It’s important that they have confidence that after the crisis is over, they still have jobs,” he stressed.

$ 1,000 per adult would not be enough to restart the US economy if, after the epidemic, a series of companies fall into bankruptcy and workers are laid off.

According to the expert Sorkin, the measures that he proposed will prevent that risk. The easiest to do is through banks with the US government reassurance. Banks have the advantage of owning existing relationships with businesses and consumers.

“It is simply that banks need to voluntarily implement this plan freely to pay back taxpayers for the 2008 bailout. Moreover, if the economy collapses, banks also go dead, “said the expert Sorkin.

Sorkin said that independent businesses need access to interest-free loans based on their income in the previous 12 months. And the government should ban companies from using loans to extend old debt or repurchase stocks.

“In the crisis, time is the enemy. With the economy slow down very fast, the unemployment rate may have rapidly increased to 6% at this time. US Treasury Secretary Steven Mnuchin warns that unemployment may rise to 20%. ”

“In fact, the whole goal of the plan is to bring the economy back to the state before the crisis started and cause as few disruptions as possible,” Sorkin said.

 

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