The coronavirus crisis: will the cure be worse than the disease?

Governments and central banks across the globe are scrambling to get ahead of the coronavirus crisis, writes John Stepek. Will they succeed? And what will that mean for investors and the monetary system?

“Whatever it takes.” It’s the catchphrase of the moment. Everyone from UK chancellor Rishi Sunak to White House economic adviser Larry Kudlow has been using it. And little wonder. Those three magic words became famous when former European Central Bank governor Mario Draghi uttered them in July 2012, effectively ending the eurozone sovereign-debt crisis with his reassurance (or implicit threat) to investors that he would stop the eurozone from breaking up, no matter what. Global authorities are now facing a far more extreme crisis – and they’re pulling out all the stops. Welcome to the era of “helicopter money”.

This week, as governments introduced increasingly tight measures to encourage “social distancing” and thus impede the spread of Covid-19, they also stepped up their spending plans for cushioning the impact on the economy. On Tuesday, Sunak announced that there will be £330bn of state-backed loan guarantees to support businesses – that’s 15% of UK GDP. He also said that if demand exceeds that amount, “I will go further and provide as much capacity as required”. Small businesses will be able to borrow up to £5m interest free for six months and the very smallest businesses will get cash grants of up to £25,000. And no business in the retail, hospitality or leisure sector will have to pay business rates for the next 12 months. Plans to help out employees were being hammered out in discussions with unions and companies, while mortgage lenders have agreed to give three-month payment holidays to those in trouble.

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John Stepek

John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.