COVID-19 has traumatized the global economy for months now. It is an unprecedented pandemic, and thus, it requires unprecedented support to overcome its impact. In March, law makers passed the CARES Act, which handed out coronavirus stimulus checks of up to $1,200 and other benefits. Most feel that the U.S. government hasn’t done enough compared to the rest of the world, and thus, they want Washington to send another round of coronavirus stimulus checks. Although each country has been impacted differently by the coronavirus pandemic, comparing the U.S. response with those of other countries will give us some idea about if the U.S. is doing enough or not.
Coronavirus stimulus checks: fiscal response of rest of the world
In March, President Donald Trump signed the $2.2 trillion CARES Act. It included coronavirus stimulus checks, unemployment benefits, Paycheck Protection Program loans and other benefits to help those unable to survive financially during the pandemic. Authorities also introduced several other bills aimed at hard-hit industries such as air travel.
In all, the amount of fiscal response from the U.S. stands about 13% of its GDP, or about $2.5 trillion, according to Ned Davis Research. However, in comparison to other developed economies, this 13% figure looks significantly lower. For Japan, the ratio of total fiscal stimulus to GDP is about 42%, while for Germany and France, it is about 33% and 21%, respectively.
“A lot of these countries have much stronger automatic stabilizers, which kick in automatically whenever economic activity slows down,” said Alejandra Grindal, senior international economist at Ned Davis Research, according to CNBC. “The U.S. doesn’t have quite the same stabilizers.”
However, Peter Perkins, global market strategist at MRB Partners notes that some of the stimulus measures from the U.S. are more generous than some of the safety nets in place in other countries. Perkins gave an example of the $1,200 stimulus checks and $600 per week in federal unemployment benefits.
How was the monetary response?
As far as the monetary response, the Fed dropped interest rates to between zero and 0.25% in March. The central bank also picked up its open-ended bond-buying program, including the purchase of Treasurys and mortgage-backed securities to ensure liquidity in the economy.
Moreover, the Fed came up with a Main Street lending program to support small and midsize companies. The Fed also accelerated its efforts in May and June in purchasing corporate-bond exchange-traded funds and debt from companies.
All such measures pushed the Fed’s total assets up by over 68% since March. In comparison, the asset expansion for the Japanese central bank was just 17.8%, while for the European Central Bank, it was 38.7% for the same period, according to data from FactSet.
One can’t really reach any reasonable conclusion by comparing the amount of the coronavirus stimulus checks and the monetary response of one country with another. However, the truth is that the U.S. fiscal and monetary response did give much-needed support to the financial markets and citizens.
Another truth is that the pandemic is not over yet, and thus, there is a need for another coronavirus stimulus package.
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