Since the epidemic spread from China to the world, groups of people have been isolated, supply chains have broken, traffic has been paralyzed, and store shelves have been looted. Decision-making institutions in the United States, Europe and Asian countries have taken intensive measures to increase liquidity and economic stimulus programs to stabilize the economy that is almost caught in shock and the unemployment. The impact of the global economy is facing this evolving virus. Central banks and financial authorities in various countries continue to carry out emergency bailouts. Countries cut interest rate to save the stock market, US stock market also happen several times of circuit breaker.
COVID-19 gradually spread to Europe and the United States, the global central banks have rescued the global economy hit by the epidemic. Countries have made a series of policies on monetary and fiscal policies to avoid another global economic crisis caused by this severe epidemic.
Federal Reserve cut interest rates to near- zero, and announced re-starting infinity quantitative easing (QE) in emergency move against virus shock. President Trump declares a national emergency, launched a large fiscal and monetary policy tools used in response to the crisis and to fight the pandemic.
China has saved the economy through a combination of fiscal and monetary policies.
A number of PBOC tools were implemented at one time, providing a large amount of short-term liquidity, while lowering several major interest rates, including the benchmark loan interest rate, giving the market a lot of liquidity, stabilizing financial market confidence and avoiding excessive economic deterioration. The purpose of increasing the demand for infrastructure construction is obvious. Tax incentives, tax cuts, fee reductions, and financial discounts and other multiple measures used to counter the possible risks of the epidemic, such as prevent enterprises failures and the capital chain breakage.
European Union and United Kingdom
The England cut interest rates urgently to 0.25%. The European Central Bank followed up on debt purchases and capital liquidity to avoid the risk of continuous credit failures that would collapse the system. Europe and the United Kingdom have followed up with the Fed's QE. The England has launched a £ 100 billion small and medium-sized enterprise favorable loan scheme (TFSME), and the European Central Bank has also added a 120 billion Euro asset purchase plan (APP) to the end of 2020.
The Bank of Japan announced that it would lift the ceiling on the purchase of Japanese government bonds. Follow the world's major central banks, in order to save the economy which hit by the epidemic, monetary stimulus measures have not been seen before. The Japanese economy shows continued deterioration. The Bank of Japan upgrading ETF purchases target; injecting a lot of liquidity into the market; helps to slow down the problem of corporate capital turnover; avoiding the continued decline of Japanese stocks and damage the central bank ’s balance sheet. Strengthening market confidence to alleviate the negative impact of the continued appreciation of the yen, inflation and the stock market.
The European and American countries turned from the point of view of neglecting the epidemic, gradually pay attention to the impact and panic caused by the epidemic on business activities and financial markets. The emergency measures of various countries and the infinity quantitative easing are not difficult to see that everyone cautious about the seriousness of the epidemic.
Comparing this epidemic with the 2008 Global Financial Crisis, the impact may be more severe this time. The impact of this wave of influence is comprehensive, enterprises face a crisis. Oil prices have collapsed, global stock markets have shrunk, unemployment rate rise and business market confidence has collapsed, countries facing recession. Therefore, the proposed bailout may need to be more cautious. The short-term announcement of bailout effect of various countries should stabilize market confidence and the stock market may boost. If the epidemic situation and the closure of the cities continue, can people’s confidence and enterprises operation continue to hang in there?
If the epidemic ends and the economy recover slowly, low interest rates will lead to the flooding of market funds, and the crisis of asset bubbles. Although the infinity quantitative easing QE is beneficial in the short term, the risks that may extend in the future which cannot be ignored.