Where Is The Bailout? Here Are The Fiscal & Monetary Responses Goldman Expects Will Be Launched Any Minute

Monday, March 9, 2020
By Paul Martin

by Tyler Durden
Mon, 03/09/2020

With everything, literally everything, crashing, traders (at least of the bullish persuasion) have one final hope: that either the Fed or the government will step in and – as has happened every time after even a modest correction in the past decade – bail them out.

Goldman is no different, and as the bank’s US economist David Mericle writes, here are some of the monetary and fiscal stimuli the government can pursue as soon as this morning, together with some considerations:


1.Expect the Fed to ease in March and April, but only have 100bp to go
2.Forward guidance (once cut to zero), but will have limited impact given where rates are
3.Start asset purchase programme (but can’t buy corporate debt)

Bottom line: Goldman thinks impact of monetary easing from here is between 50% and 75% of medium past recessions


Need to address 3 issues:

1.Lost aggregate demand – Income tax cuts, payroll cut, policies to keep local governments spending
2.Lost jobs – Extend unemployment and under-employment insurance (as per GFC).
3.Cash shortage – Re-allow carry back of operating losses. Increase funding for small business lending. Direct aid or loans to airlines.

Goldman also notes that in 2008 congress passed a stimulus package despite a divided government.

* * *

In a separate note published shortly after, Goldman’s chief economist, Jan Hatzius disclosed his own updated views on the shape of “The Policy Response”, in which he ominously notes that while “monetary policy is probably not particularly effective at the moment” he expects a 50bps cut in March “in part because the bond market is already priced for a large move and the FOMC will likely be reluctant to risk further tightening in financial conditions by refusing to deliver.” He is also “penciling in a final 50bp cut at the April 28-29 meeting” even as he writes that fiscal policy is “probably the more potent tool”, which in turn goes back to market whispers over the weekend that nothing short of a $1+ trillion package will rescue the market.

The Rest…HERE

One Response to “Where Is The Bailout? Here Are The Fiscal & Monetary Responses Goldman Expects Will Be Launched Any Minute”

  1. White Scooter Trash

    What we are witnessing economically at this given point is an open coffin that is closed for business. No deposit no F*****G return. End of Story.


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