The US Senate made a very important decision by passing a new package of economic assistance at $480 billion.
Why is it important? The breakdown of the aid is as follows: 75 billion is allocated for medicine, 25 billion is for coronavirus testing while the rest which amounts to $340 billion is allocated to support for small businesses through loans. A business can get a loan of up to $10 million and the loan can not be repaid if at least 2/3 of the loan was spent on preserving jobs and creating new jobs.
The United States and Europe took different paths in solving the crisis. EU countries emphasized business support by paying business' compensation for maintaining salaries of 70-80% under quarantine. While in the US, payments were sent directly to people, the businesses did not receive anything which provoked a massive reduction in workers to 22 million (judging by the weekly applications for unemployment benefits).
A new package can significantly improve the situation.
In Russia, many well-known economists and politicians appealed to the authorities with demands and calls to help people and businesses by paying money to people who are forced to follow quarantine rules, to compensate small businesses for the salaries of workers for forced downtime, and to cancel part of the utility bills (as poor Georgia did).
In response to this, the government, Moscow Mayor Sobyanin, the Central Bank, as well as the heads of the largest banks (Sberbank, VTB, Otkrytie) all spoke out publicly against distributing money to the population saying that Russia's budget will not be able to carry this through and that it is not necessary to do so.
My opinion is that the leaders of the banks and the authorities do not understand that giving money to small businesses (having to close the business at the request of the authorities) is not philanthropy. The business will go bankrupt and shut down, the economy will lose up to 10 million jobs. People who have not received help when they cannot go to work (as decided by the authorities) will cut consumption sharply, the economy will lose a significant part of demand and the production and trade will fall. This will cause a new wave of reductions, and tax revenues will drop sharply. The economy will roll back 10 years and will recover very long and slowly.
Understanding all this, even such inveterate supporters of hard capitalism, like Trump and Republicans in the United States, go on free distribution of money to the population and small business. Otherwise, it will be bad and the crisis will stretch for 10 years.
We will see the effect of this difference in crisis management policies when the global economy emerges from the crisis.
EURUSD:
Buy from 1.0900.
Sell from 1.0810.
