Dissecting the Adverse Money Supply Impact of Coronavirus in the US
There is no question that the Covid 19 pandemic has had a disastrous effect on the world economy; the consequences will undoubtedly reverberate for decades.
Interestingly, despite the privileged status of the US as the sole superpower, the pandemic has not spared the country.
Indeed, the Covid-19 impact in the US has been among the worst; worse than the situation in China, which apparently delivered the monstrous virus.
Leaving statistics aside, since the pandemic first hit the world at the beginning of 2020, how has Covid 19 affected money supply in the US?
Let us determine a few pertinent matters on the question.
As noted, the Covid 19 pandemic has had a disruptive effect on many leading economies, including the US. There is no doubt that the pandemic has severely disrupted the global distribution of goods.
This has made it more challenging for companies in the US to fill their orders. Many workers have lost their jobs while the labour supply has drastically reduced. Ultimately, the pandemic has considerably slowed down the international demand for US services and products.
According to Kristalina Georgieva, the IMF director, the outbreak of the coronavirus pandemic is currently regarded as “the world’s most urgent uncertainty.”
Moreover, the disruptions and uncertainties caused by Covid 19 are now evident in the world financial market’s increased volatility, as well as the overall lower valuations. Yes, the Covid 19 pandemic comes with considerable risks in the world economy.
US Government Budget Cuts to Key Institutions Impact Financial Supply
In attempts to mitigate the effects of the Covid 19 threat on the US economy, the Trump administration has taken a raft of measures. These measures are generally aimed at jumpstarting the massively jolted economy.
Experts have suggested that to avoid making a bad situation worse, the Trump administration should support specific programs that could help counteract the adverse economic effects of Covid 19.
Notably, in its early 2020 proposals, the US government determined to cut down budgetary funding for the Centers for Disease Control (CDC) by a whopping 16%. The government also planned to cut $85 million that had been initially allocated for the program for Zoonotic Infectious Diseases and $25 million allocated to the Health and Human Services department.
Moreover, the government announced a plan to slash off $18 million from the allocation initially granted to the strategic Hospital Preparedness Department. Hence, in the new measures, the administration planned to inject an extra $1.25 billion in fresh emergency funds to boost the Covid 19 response efforts.
These funds would be slashed off from various other federal programs.
Despite these targeted measures, other experts considered it imperative for the government to halt such budgetary cuts for strategic institutions and, instead, support coordinated efforts to deal with the Covid 19 outbreak. Further, they advised the government to invest in emergency preparedness and public health and act proactively to minimize harms.
US Companies, State Governments and Households in Deeper Debt in 2020
Compared to the period preceding the SARS outbreak, many US companies, households, and state governments are today in deeper debt than ever before.
Consider this: The national nonfinancial corporate debt for major US companies today stands at about $10 billion.
Notably, this figure went up from a mere $4.8 trillion back in 2003.
Interestingly, the Deutch Bank recently released an analysis that indicated that the major world economies, including the US, now carry unprecedented debt levels not witnessed for the last 150 years.
The only exception is the Second World War era.
Despite this, these nations will have to service debts regardless of declining jobs, tax revenues and customers; they would do so despite running increasingly weakening economies.
Ultimately, the fixed costs will leave the nations with little money to use in other areas of the economy. Certainly, as we all know, large debts are a perfect catalyst for spurring a sure economic slowdown.
This is especially true if central banks are unable to cut down on interest rates.
One of the most apparent effects of the Covid 19 outbreak is the unprecedented disruption in the global supply chain.
This situation has affected money supply issues in the US in a peculiar way.
US Smart Technology and Motor Industries Reel from Money Supply Issues
After the coronavirus broke out in December 2019, many US manufacturers were forced to reduce operations or close down altogether.
Many others could not finish their production as planned. Among the most affected US companies were smart technology and motor assembly industries.
Because most companies were unable to deliver goods to customers, the economic activity was severely hampered. In turn, this led to reduced growth.
Moreover, it has been noted that many consumers are buying fewer items due to lingering worries about the spread of the deadly virus. Instead of spending, most citizens are steeped in efforts to boost emergency savings.
Because many companies have been forced to close, the income levels of many US households have significantly declined. This means workers are getting less money than before. Others have to do without a monthly payment.
Obviously, such people have little to spend.
The overall demand for goods in the US is, therefore, getting adversely affected.
The US Loses a Whopping $ 10.3 Billion From Chinese Flight Cancellations
Due to massive flight cancellations affecting travel between the US and other countries, many people are no longer visiting from countries like China.
Thus, some consulting firms have estimated that, since the US is losing 1.6 million potential visitors from China, this translates to a staggering $10.3 billion loss.
Further, US multinational companies that rely on Chinese markets have suffered huge losses and closed businesses. The fact that most companies can no longer access the major international markets means there will be huge repercussions for the growth of the US economy, money supply and employment.
Conclusion
Covid 19 pandemic has led the US to what some describe as “a black swan situation.” This is a highly unpredictable and rare incident that can lead to devastating consequences.
Since the Covid 19 virus visited the world in early 2020, the US has suffered a significant stagnation on money supply as well as unexpected economic problems. Many companies have scaled-down operations, while others have closed businesses.
Thousands of people have lost jobs. This, in turn, has led to lower purchasing power, less demand for goods, and lower consumption rates.
Hence, being in a black swan situation, the government is tasked with steering an unsteady vessel in the middle of a pandemic whose demise seems to be far away.
Yes, with regards to the current US money supply quagmire, the jury is still out on whether a silver lining is lurking on the horizon.