Name: Coronavirus relief bill: How it helps the economy
Uploaded: 2020-03-26
Duration: 4 min 11 s
Description: And where the $2 trillion is coming from.

After days of intense discussions, the Senate has reached a bipartisan agreement on a historic relief package for this pandemic. [ MUSIC ] There's no question that the most urgent part of the package, and the one that's gonna have the biggest impact on the economy is the business part. Specifically the part that guarantees that credit is gonna keep flowing in the system. The credit markets are the heart of our economy, because when they shut down, then the whole economy shuts down. The economy goes into cardiac arrest in the case of a credit shut down. That's what people were really afraid of. That's what markets were afraid of. And a lot of confidence came back With this new package because it's perceived as being big enough to starve enough to keep the credit markets open. [ MUSIC ] The goal of this rescue package is really twofold. One is to make payments to individuals so they can keep on spending and they keep their lifestyles in order in terms of Paying their rent, buying groceries. So one of the provisions involves direct payments to individuals. And the other provision involves funding small businesses still keep people on their payrolls. The payments are substantial there's going to be $ 1, 200 checks set out to adults and 2, 400 for couples. And then another 500 for children. These are one time payments. So these are substantial amounts. In addition to that you've got 365 billion set aside for aid to small businesses. And these are loans and the loans essentially pay the salaries of the workers, or the wages of the workers for two weeks. And if companies stand up, indeed, spend that money funding their payrolls and keeping people employed, then those loans are forgiven, and they really become a grant, right? [ MUSIC ] $ 2 trillion is a lot of money. $ 2 trillion is the equivalent of 10 % of the total economy. And it's about 10 % of our total national debt. These numbers are just staggering. Never seen anything like this. So where do you get the money? Well, the Treasury has got to float government bonds additional borrow more money by selling treasuries, which has not proven to be a problem recently because it's such a flight to quality In these treacherous times when investors get nervous, where do they go. They go to the safest investment in the world which are US government bonds. The rest of the money is going to be put up by the Federal Reserve and the Federal Reserve has the infinite ability to create quiddity. So what the Fed is really doing is they are stepping up with about actually $ 4 trillion in liquidity, we've never seen anything like it before, to support the commercial paper markets and repo markets that provide funding for brokerage firms, for hedge funds, the kind of cash that the companies require to do business. That is all being short and liquidity is going to be there to back those markets. If these companies can't get funding in the private markets, the Fed and the Treasury as partners are stepping up and guaranteeing that they will provide that funding up to $ 4 trillion. What's most troubling is the increase in debt and that's something that we're gonna have to deal with in the years to come that's gonna be on The children and grandchildren of young people today or even middle aged people today because you got to pay it back at some point. I say to the American people, Help is on the way. big help. Quick help. We've never seen anything this big. That's been this quick In the 2008 crisis, the great recession we had the tarp bailouts, which were tremendous because they refunded the banks, we liquefied the banks, that got the banks out of trouble. But that happened over a matter of years. This time it's happening instantaneously. We're talking about a one week delay in getting this package passed, but it's unprecedented. It's a government mandated shutdown big swaths of the entire economy. It's as if 911 happens and it went on for months.

Coronavirus relief bill: How it helps the economy

Finance

And where the $2 trillion is coming from.