There are growing concerns that “Stimulus Addiction” may pose a growing threat to financial markets, according to a new article from Bloomberg/Quint. The site notes that countries all over the world have been using stimulus programs to help boost their economies amid the global coronavirus pandemic. Speculation says that this could be a tough thing to reverse-course on, moving forward.
Ultimately, the pandemic has caused a massive drop in consumer demand, which is led to higher inflation rates. The longer that businesses need to be bailed out by the government, the harder it might get to break the cycle. “Many EM governments will confront even greater social problems post-Covid-19 than they were facing before,” said David Hauner, a London-based strategist at Bank of America Corp. “A permanent increase in government spending appears likely.” Michael Bolliger, the head of emerging-market asset allocation at UBS Switzerland AG in Zurich, added, “It’s hard to break bad habits. There is a fine line between providing temporary support to local economies and the risk of higher inflation and ultimately debt monetization.”
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In the United States, the government passed the CARES act in March, which provided financial support to individuals, families and businesses of all types. For taxpayers, the CARES act provided “1,200 per adult for individuals whose income was less than $99,000 ( or $198,000 for joint filers) and $500 per child under 17 years old – or up to $3,400 for a family of four.” The payments were managed by the IRS, with the first round of payments being sent via direct deposit. Paper checks were later sent to those who did not previously provide the IRS with direct deposit info.
There have since been conversations surrounding a second stimulus package, with the House introducing the HEROES Act, which would provide for much more financial assistance for families and workers on the front lines of the pandemic. Recently, President Donald Trump stated that another round of checks is on the way. Trump shared the information during a conversation with Joe St. George, National Political Editor & Washington Correspondent for Scripps. The president would not divulge number, but stated that the amount of the checks would be “very generous.” When asked when the new plan would be announced, Trump replied, “I think over the next, I think it’s going to be bi-partisan, I think it’s going to be over the couple of weeks, probably.”
