When Fed officials hold their regular policy-making meeting next week, all the lights on their dashboard will be flashing red. The unemployment rate is expected to reach double digits by June. With global demand cratering, the Fed’s preferred measure of inflation will likely fall to 1% or even lower by the end of the year – well below its target of 2%. And in the absence of a Covid-19 vaccine, the malaise will likely persist well into 2021.

Any Economics 101 student knows that in such a dire situation, the central bank should cut interest rates to stimulate growth and job creation. But as Chair Jerome Powell reiterated last month, the Fed doesn’t plan to do so in the foreseeable future, because a further quarter-percentage-point cut would drive the interest rate it pays on banks’ reserve deposits into negative territory.

Why the fear of negative rates? A decade ago, the answer would have been that it was impossible to go below zero: Banks would simply avoid the charges by withdrawing their reserve deposits and holding the funds in paper currency, which pays zero interest. But economists now recognize that doesn’t happen, because it’s costly to store billions (or trillions) of dollars of paper currency safely. Several European central banks, as well as the Bank of Japan, have successfully taken interest rates below zero.

This stimulates consumer demand in the usual ways: by incentivizing banks to make loans at lower interest rates, to bid up the prices of financial assets, and to charge higher fees for deposits.

Another of the Fed’s concerns about negative rates has to do with financial stability – a relatively new (and completely made up) responsibility of central banks. Sure, negative interest rates would help lower the unemployment rate from what is likely to be its highest level since World War II. But officials worry that they will also weigh on banks’ profitability, pushing down share prices and making the financial system more vulnerable to distress. Put crudely, the Fed is giving up on unemployment reductions to help keep banks and their shareholders safer.

The Fed is inventing a trade-off where none exists. If the central bank really cares about financial stability, it has many tools to ensure it. Right now, for example, it could block large banks from paying dividends, a practice that erodes the capital they need to absorb losses. None of this precludes a monetary policy focused on the Fed’s congressional mandate of maximizing employment and keeping inflation near target.

So, the Fed is left no good argument against going negative. Terrifyingly high unemployment and potentially rapid disinflation are powerful arguments in favor. Next week, the Fed should take interest rates at least a quarter percentage point below zero.

– – –

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners. Kocherlakota is a Bloomberg Opinion columnist.

Washington, D.C., is enjoying its cleanest air in at least 25 years, thanks to decades of local, state, and federal policies combined with a wet, windy spring. Bicycles abound; there’s almost no car traffic. Birdsong awakens us, sometimes far too early. There is, of course, a global pandemic element to the quietness, and pandemic-induced shutdowns are really not the way to way to get clean air. The same way an economic collapse is really not the best way to get cheap gasoline.

There’s another thing I can see that Earth Day’s founders would be delighted by. On my roof, barely visible through a skylight, is a solar-power system that will more than meet my power demand for the day. It’s a small thing now, but it would have been an unimaginably big deal in 1970. Five decades on from the first Earth Day, an energy resolution that started low and slow is now changing the world in real time.

It all started 16 years before the first Earth Day, in 1954, when Bell Laboratories unveiled the first photovoltaic cell. They called it the “solar battery,” and the ads for it are charming. “The same kindly rays that help the flowers and the grains and the fruits to grow,” reads one, “also send us almost limitless power.” But the early marketing also contained a strong dose of realism: “There’s still much to be done before the battery’s possibilities in telephony and for other uses are fully developed.”

Much to be done, indeed. Photovoltaics were wildly expensive, complex to produce, and tiny. There wasn’t even a commercial application for them until 1962 with the Telstar 1, the “first privately sponsored space-faring mission” and the first satellite to relay a transatlantic television signal. Now solar power is standard on satellites.

Other uses followed-power for weather stations, pipeline monitoring systems, and off-grid homes-until developments in the mid-1970s made it possible to put a commercial value on PV cells. Make no mistake, they still weren’t cheap. The earliest data BloombergNEF has on solar costs shows that panels went for more than $100 per watt in 1976. A residential solar installation needs output of at least several kilowatts. That means a few years after the first Earth Day, a pioneering solar homeowner would have had to spend tens of thousands just on panels, not to mention the costs of engineering, installation, and power equipment.

What a difference four decades makes. Last year, one PV panel cost $0.23 per watt-a 99.3% decrease. Entire systems now cost less than what the PV module alone cost just seven years ago. Today’s panels are also much better than what came before: more efficient, more reliable, more durable, and lighter-weight. I could heft a solar panel on my own if I wanted to. My neighborhood is now dotted with “We went solar!” signs.

To put that in context, let’s look at another energy revolution underway before Earth Day No. 1: nuclear power. In 1954, just a few months after Bell Labs brought its Solar Battery to market, Lewis Strauss, the chairman of the U.S. Atomic Energy Commission, gave a speech to the National Association of Science Writers in New York. There’s a key section, one that’s been bandied about often since:

“Transmutation of the elements-unlimited power, ability to investigate the working of living cells by tracer atoms, the secret of photosynthesis about to be uncovered-these and a host of other results all in 15 short years. It is not too much to expect that our children will enjoy in their homes electrical energy too cheap to meter, will know of great periodic regional famines in the world only as matters of history, will travel effortlessly over the seas and under them and through the air with a minimum of danger and at great speeds, and will experience a life span far longer than ours, as disease yields and man comes to understand what causes him to age. This is the forecast for an age of peace.”

Needless to say, the harnessing of the atom didn’t give us energy that’s “too cheap to meter.” Building a new plant now costs tens of billions of dollars, meaning that newly built nuclear power has a hard time competing in many power markets. But the PV module has fulfilled Strauss’ vision and then some: it gave us energy that’s so cheap, people are being paid to use it.

Negative prices are a feature of a properly functioning energy market, and perhaps you noticed on Monday that the key U.S. oil benchmark closed trading at -$37.63 a barrel. Those are cases where the market must pay someone to take product away to balance supply and demand. It’s happening now in electricity, too, thanks to solar and wind power.

Clear skies over Germany meant that intraday wholesale power prices were negative earlier this week. In Britain on April 19, electric vehicle charging platform Ohme said that its customers were paid 69 pence to add 130 miles of charge to their vehicles.

This is bigger than the market havoc of the pandemic. It’s just the beginning, really, of an energy world with more and more moments of being better than too cheap to meter. People will get paid to charge. Services will crop up, on-demand, to use free or negatively-priced electricity. Fleets of electrolyzers will use renewable electrons to produce hydrogen and help reduce emissions in steel, cement, and glass production that are right now a tremendous environmental challenge.

And that’s the revolution. It would have seemed ridiculous even 10 years ago, much less 50, and yet here we are.

– – –

Bullard is a BloombergNEF analyst who writes the Sparklines newsletter about the global transition to renewable energy.

Over the past few weeks, we have seen governments implementing additional precautionary measures – from travel bans and nationwide lockdowns to intensified border control and regulations – in a bid to contain the spread of Covid-19.

While deemed necessary for the nation’s health and safety, some of these measures can have a potentially damaging impact on a country’s food security.

It is therefore critical that governments and the industry come together now to ensure that food supply chains remain open and that food production continues unhindered so consumers can have continued access to safe, healthy and nutritious food during this pandemic.

This is especially important for the Asean region, where the food-value chain is highly integrated and involves multiple stakeholders. What we must do is ensure each country keeps its supply chain open. Closures or disruptions of food supply chains in one country can have a devastating impact on other countries and we are already starting to see this play out following the decision made by some governments to suspend the export of staples and other commodities.

If countries across the region begin following suit and implementing such protectionist measures by effectively closing their supply chain, consumers will find it even more difficult to access healthy food and adequate nutrition, especially during this time of crisis.

Closing off food supply chains within Asean will also have extensive economic impacts because the region’s food-value chain is a major driver of the member nations’ gross domestic product (GDP) and employment. Alone, it contributes around US$500 billion (Bt16.34 trillion) of economic output – about 17 per cent of Asean’s GDP – and 113 million jobs.

Essential service

To prevent such issues, which bring added pressure to an already critical situation, governments need to consider the food and beverage industry as an essential infrastructure, and minimise disruptions to the region’s food supply chain.

This means making sure that their countries’ food supply chains can continue to operate at full capacity. Where possible, and with the industry’s cooperation to reinforce efforts to keep employees safe and healthy, there should be exemptions made to measures that restrict the movement of workers to and from food-manufacturing facilities so the production of food and beverage is not hampered.

In doing so, the industry and government bodies must also ensure an adequate supply of personal protective equipment (PPE) so workers are well-equipped and protected.

Governments also need to ensure that the measures they put in place do not delay or disrupt the flow of manufactured products, ingredients and raw materials including food packaging material. For instance, blockages imposed on transport routes should not affect the flow of food and beverage items into a country. Transport vehicles delivering essential food items should be granted entry and be exempted from restrictions across national, state and district borders.

The more vulnerable and food-insecure countries should also be supported by those that are more resilient and have more supplies, particularly in perishable and associated items. This would mean reducing tariffs to facilitate the flow of food and commodities during this time of crisis.

At the same time, it is also important for governments to ensure that the retail sector can continue selling food and beverages uninterrupted so people have easy and convenient access to food.

At an industry level, we recognise that companies must also adapt to the challenges and continue providing access to essential food and beverages amid changing consumer needs during the crisis.

We are already seeing a number of food companies shift their production to focus on packaged and frozen foods to meet the surge in demand from consumers who require packaged food with longer shelf-life as they experience longer movement-control orders around the region.

Keep consumers reassured

It is still uncertain when the coronavirus pandemic will be fully contained, but it is critical that governments continue to keep their people assured that they will have access to essential food products.

Countries need to remain calm and come together in solidarity instead of resorting to protectionist measures that restrict the flow of food as these will only serve to sow division, lead to retaliatory action and instigate further panic.

Now, more than ever, is the time for us to take action collectively to keep food supply chains open and to protect the flow of food so consumers can remain healthy with access to necessary, safe and high-quality food during this global pandemic.

The private sector is calling on the government to help by paying 50 per cent of employees’ salaries, especially for those who have been forced by the Covid-19 outbreak to take leave without pay, and is also asking it to cut down the wages it has to pay to daily wage earners from eight hours to no less than four hours a day. There are concerns that the outbreak will last for another two to three months, which may result in up to 10 million people losing their jobs.

Suphan Mongkolsuthee, chairman of the board of directors of the Federation of Thai Industries (FTI), said the Joint Standing Committee on Commerce Industry and Banking (JSCCIB) has decided to encourage the Thai Credit Guarantee Corporation (TCG) to provide 80 per cent credit guarantee for loans taken by SMEs up from the current 40 per cent, reduce employers’ social security contribution from 4 per cent to 1 per cent and cut down on electricity bills by 5 per cent.

In addition, he said, the Social Security Office should help businesses affected by Covid-19 by helping to pay 50 per cent of the employees’ wages calculated from a base salary of no more than Bt15,000 or no more than Bt7,500 per employee. The employer will pay another 25 per cent of the wages and deduct this expense to cut down on corporate income tax.

There are some 18 million people who come under the social security system, of them about 10 million are severely affected by the pandemic and should receive aid, so entrepreneurs can continue employing them.

“If the government does not help these operators, a lot of businesses will be closed leaving more people unemployed. If these businesses can maintain their workforce, then they will not have to start all over again once the situation improves,” Suphan said.

As for helping SMEs, the government should improve the procurement regulations for government agencies to use locally manufactured products as well as speed up payments to private contractors working on government projects to boost their liquidity. The government should also waive corporate taxes for SMEs for two years, because most small businesses have almost no revenue and some are even making losses. The government should also cut down on the mortgage fees and land transfers to 0.01 per cent.

In order to further reduce costs for entrepreneurs, the government should get rid of red tape and allow requests to be made online, as it will greatly reduce the operators’ expenses and cut down on travel during the pandemic.

Kalin Sarasin, chairman of the Thai Chamber of Commerce, said that according to private estimates, at least 7 million people are expected to be unemployed in the next two months. If the Covid-19 situation continues for another two to three months, the unemployment numbers may rise to 10 million, including unverified labourers. Therefore, he said, the government should speed up the disbursement of loans to entrepreneurs and grant income tax benefits for businesses that have accumulated losses for the past five to seven years.

The authorities should also automatically renew work visas for foreigners working in Thailand at least until May 31.

As for helping the private sector’s help with the fight against Covid-19, the government should completely waive taxes so businesses have more money in hand to fight the contagion.

The data centres’ importance is even more apparent now, with the ongoing Covid-19 crisis and massive digital traffic. Businesses have transitioned to working remotely, online retailers provide our daily necessities and even our communication and social interactions are online.

With growing consumer appetite for information, solid infrastructure and favourable Thailand 4.0 policies – Delta Electronics believes that Thailand has the potential to emerge as a data centre hub for Southeast Asia.

Explosion in data volume

Thailand’s mobile penetration rate is a staggering 134 per cent, and 52 million people are active internet users who spend at least nine hours online daily. And with the current crisis, time spent online will only rise.

According to Google’s e-Conomy SEA 2019 report, Thailand’s internet economy is valued at US$16 billion (Bt523.6 billion) and is expected to grow more than three-fold to $50 billion by 2025.

While data centres form the backbone of the digital economy, a sharp spike in demand can cause many decision-makers to realise the importance of reliable digital infrastructure in business and operational continuity.

In the present climate of growth, a continued development in Thailand’s large-scale government data centres, private sector cloud and colocation type data centre businesses can be expected. Accelerating digital transformation in banking, telecommunication and e-commerce industries will also create new value and opportunities throughout the data centre supply chain.

Rise of hybrid data centres

Over the years, there has been a significant shift in industry from company owned-and-operated data centres to more outsourcing to colocation operators. Global technology and cloud companies are migrating from large-scale data centres to independent operators to cope with rapidly growing demands for cloud storage and computing, as well as to increase profit margin.

We see volume and security as two major factors driving the development of data centre infrastructure towards a more hybrid type, which combines the pros and cons of both cloud and on-premise type data centres.

Hybrid data centres leverage small-sized data centres for local processing and storage of confidential data, in cooperation with cloud data centres to store or process other kinds of non-sensitive digital data.

This means data centre requirements are evolving to suit the needs of multiple small-sized, on-premise data centres rather than a single large-scale centralised one. This approach helps businesses maximise flexibility while minimising cost and maintaining competitiveness.

In a crisis like the Covid-19 outbreak, turnkey data centre solutions and full service from experienced suppliers can help operators become better at anticipating catastrophic events and offer better resilience planning. This crisis offers a good opportunity for more businesses to examine the resilience of their mission-critical systems and consider contingencies and backup for their data centres.

New industry players

The recent partial launch of 5G technology in Thailand means a lot more than just faster data on mobiles. Instead, the 5G technology will drive IoT (internet of things) and form the backbone of new technologies like self-driven cars, smart cities or home and factory automation.

Smart manufacturing platforms require 5G technology to integrate with edge computing for field data processing. Data collected from field devices or sensors on the factory shop floor allow real-time remote processing and big data to make informed decisions in the control rooms. In order to implement edge computing to support 5G infrastructure in time, factory operators should consider prefabricated data centres due to their fast deployment and scale-out abilities.

IoT will also boost micro and colocation data centres that are alternatives to enterprise data centres. IoT devices are also predicted to account for 50 per cent of all networked devices by 2023, while half of all workloads will be run outside the centralised enterprise data centre as early as 2021.

Data centre opportunities in Thailand

In Southeast Asia, Singapore is known for its state-of-the-art data centre industry with strong network connectivity, reliable power supply and conducive business environment. But now the city-state no longer issues new licences for data centres because it has run out of land for such infrastructure.

After Singapore, Thailand looks very promising because its central location makes it ideal for expansion opportunities into neighbouring countries. The country’s Eastern Economic Corridor (EEC) zone has incentives for investors, is located less than 30 kilometres from undersea cables and situated more than 100 metres above sea level to protect it from floods.

Overall, prefabricated data centres are a great choice to accelerate Thailand’s digital economy growth in the next couple of years. Any type of data centre chosen, whether it is for UPS ranging from small to large volume electricity backup, precision cooling, indoor and outdoor micro data centres, rack system and data centre management software will be good. Besides local design, installation and after-sales service, locally built data centres are highly reliable, ultra-efficient and excellent in provide immediate success.

With rising demand in Thailand and Asean for a more productive and convenient digital lifestyle, technology-driven IoT adoption and favourable incentives offering great return on investment – we believe it is now time to explore the best data centre opportunities for you.

Sakda Sae-Ueng is the Communication & Information Solutions Regional Director at Delta Electronics (Thailand).

Delta Electronics is the global provider of data centre solutions including UPS, cooling, rack, management software, and prefabricated Point-of-Delivery data centre with industry-leading power usage effectiveness.

As we stand several years into cross-industry disruption, driven by technological, regulatory, and competitive forces, we see continuous change in the business landscape. Looking back from mid-year of 2019, there were signs of global economic recovery from the decrease in inventory numbers in many countries and industries, the bustling in industrial production, and trade war between the United States and China began to unwind. However, starting from the beginning of 2020, budget stumbled and the coronavirus outbreak throughout the world causing economic stagnation.

Inevitably, we also face a VUCA+ landscape in Thailand as well. Risks identified by the Bank of Thailand includes the recent coronavirus outbreak causing the decline in tourism revenue, political instability causing the delay in budgeting, drought, which has direct effect on agricultural business. We are facing challenges in all aspects. No one can tell to what extent, how long, and how bad the impact will be. Now more than ever, disruption has gone from episodic to continuous and relentless. We need to assess the situation from various perspectives and take immediate action. The longer we wait, the stronger damage these situations will bring.

These are turbulent times for CEOs. Social upheaval, technological advances, and new generations of workers, among other things, add to their already long list of challenges. To help CEOs navigate the beyond VUCA+ of such landscape, we need to address such challenges in smarter ways. One of which is through strong leadership. Deloitte research suggested that chief executives of large organisations have the opportunity to thrive, by arming themselves with the skills to be un-disruptable. Five characteristics viewed as essential aspiration for an un-disruptable CEO includes:

Embrace ambidexterity

One of the key elements for business to survive in a VUCA+ landscape is to pursue two different paths that are often seen as complete opposites – cultivating the tension between exploitation and exploration by enhancing current operations and exploring the continually emerging new frontier. This includes ability to excel at both reliable profitability and risky breakthroughs and to seek opportunities that spark radical innovation while simultaneously optimising existing capabilities. To balance these oppositional elements and embed them in all processes, structures, and cultures will be challenging for CEOs.

Cultivate emotional fortitude

Emotional fortitude refers to the ability to use fear of the rapidly changing landscape to fuel more productive outcomes, and understand that failure to some extent is inevitable. CEOs need to convey the need for risky – but well conceived – ideas that may or may not work, create the culture where the possibility of failure is embraced and cultivate this element within their companies.

Encourage a beginner’s mind-set

The concept of “beginner’s mind” where CEOs will need to ask more questions, listen more intently and considering what they hear with less judgement, might not come naturally to them as traditional CEOs normally have the “know it all” attitude as they are expected to know it all. They usually have the confidence that comes with experiences. As we cannot rely on the static pattern to predict the future in VUCA+ landscape, the success could indeed depends on knowing what they do not know. The un-disruptable CEO should then learn to be curious, to express curiosity, and having the “eyes” of someone who does not know everything in order to stay vital.

Master disruptive jujitsu

Practicing disruptive jujitsu means to learn from the competition, then deliberately disrupting one’s own business model in order to stay ahead of it. Mastering in disruptive jujitsu would be ideal for how CEOs should handle disruption. Recognising threatening disruptions, breaking them into their components, selecting those components that can strengthen their organisation, and then finding a way to “hijack” these disruptive elements for their own competitive advantage.

Become the ultimate end-user ethnographer

In the world of disruption, along came technology that changes consumer’s behaviour in entirely new ways. Consumers are now online, social, hyper-connected, and overflowed with product knowledge and description. It is now more important than ever for CEOs to gain insight into experience of the ultimate end-user, becoming their most trusted champions by discovering their most subtle habits, desires, and subconscious concerns – to go beyond the consumer’s consciousness. While machine learning and artificial intelligence hold distinct promise for a more granular view of the practices based on large populations of consumers, they are far from a complete solution to this challenge.

These five characteristics lay the groundwork for a new or more nuanced leadership model. To succeed in this VUCA+ world, these elements should be embedded within the newer, emerging role of the CEO. Rather than these five isolated factors, mixed use of these characteristics as a whole is recommended. Organisation will also need to adapt in order to facilitate this new leadership model.

Contributed by Subhasakdi Krishnamra, Managing Partner, Deloitte Thailand and Sakolsri Satityathiwat, Senior Consultant, Deloitte Thailand

–First, mandating social distancing in response to the covid-19 crisis requires socializing the economic costs of doing so. We as a society can’t reasonably require social distancing, with the massive economic consequences it entails, and believe that most of those costs should be privately borne. We therefore need to either abandon social distancing (thereby overwhelming health systems and sparking untold deaths) or enact much larger stimulus measures. And by much larger I mean far larger even than the eye-popping figures the Trump administration is now pursuing in the U.S.

–Second, the disruption is so vast – the economy in many sectors and areas has effectively come to a standstill – that government failure to act will result in an avalanche of bankruptcies and extended unemployment that will, in turn, inflict lasting damage on businesses and families, even after the health crisis passes. Economists call this phenomenon hysteresis; others call it not being able to put Humpty Dumpty back together again. It is why government intervention cannot be limited to the sectors most directly affected (airlines and hotels, for example) and must take new forms beyond the conventional tools (such as rebates to individuals). While many existing stimulus measures are necessary and helpful – especially support for unemployed workers and state governments – they are terribly inadequate given the scale of the economic damage already occurring.

–Third, given governments’ adoption of social distancing, the dilemmas we face will continue until an effective anti-viral or therapeutic can be found that allows us to contract the disease without suffering significant harm. In the meantime, even if current efforts are successful at attenuating the spread of the disease over the next several weeks, social distancing will need to be re-imposed in cycles. Given the plausible timetable for developing a vaccine, and unless we get very lucky and the virus itself mutates in a less harmful direction, these cycles could continue for well more than a year.

–Fourth, a proper response to the covid-19 crisis will stress test the increasingly popular proposition that government deficits don’t matter. This is a fiscal risk worth taking. Indeed, those who argue that the cost is too high or that a stunning increase in the deficit is too risky need to return to the first point above, because the budget impact reflects the economic consequences of social distancing. If you don’t like the fiscal cost but you favor social distancing, what you’re really saying is that you are willing to accept millions of bankruptcies and the ripping apart of corporate and social fabrics across the world.

–Fifth, the economic harm comes mostly from the sudden stop in business activity due to social distancing, not the lost productivity of those suffering or dying from covid-19. The demographics of those suffering from coronavirus and those suffering from the economic virus are quite different.

Governments around the world are awakening to these truths, and beginning to debate how to assist businesses suffering from the downturn. The U.K. is considering making grants to companies for up to 80% percent of salary, capped at 2,500 pounds ($2,900) a month; offering loans to small and medium-sized businesses; and taking equity stakes in airlines and other companies. Denmark has put forward a program to subsidize 75% of payroll for companies facing a need to cut jobs by 30% or more. France is considering equity injections and loan guarantees.

The economists Emmanuel Saez and Gabriel Zucman have proposed that governments simply pay companies to cushion the shock: “In the context of this pandemic, we need a new form of social insurance, one that directly targets and works through businesses,” they wrote earlier this month. “The most direct way to provide this insurance is to have the government act as a buyer of last resort. If the government fully replaces the demand that evaporates, each business can keep paying its workers and maintain its capital stock, as if it was operating under business as usual.”

And Andrew Ross Sorkin of the New York Times has suggested a universal loan program, with a zero interest rate and extended repayment terms.

One thing is clear about stimulus measures in this crisis: Bigger is better. To my mind, the least-worst option is a large and comprehensive program of loans to businesses, as Sorkin has proposed, which could be extended quarterly and limited in the first instance to a share of 2019 revenue. It should work according to these four principles:

–All companies and sole proprietors should be eligible, given how hard it is to quickly assess which industries are affected and the feedback loops across sectors and businesses. The only condition should be that the companies maintain payroll and payments at some threshold relative to 2019.

–The program can most effectively be administered through banks, with the government then buying the loans and borrowers repaying through the tax code. Repayment could take the form of allowing a company or individual to deduct only a certain share of non-labor expenses until the debt is repaid. This approach in effect provides an auto-stabilizer for the repayments: They will be accelerated if the economy starts booming and delayed if doesn’t. Repayments will also be faster for firms that get back on their feet faster and that spend a smaller share of their budgets on labor. By having the government take loans off banks’ balance sheets up-front, this strategy also avoids further capital stresses on banks.

–In the event an effective therapeutic against covid-19 is delayed, causing the economic shock to last longer, the loans could be transformed into grants (thus moving from Sorkin’s idea to Zucman and Saez’s). It is nonetheless better to start with loans, and then forgive those loans (thus shifting to grants) if necessary, because we don’t know how long or severe the downturn will be, and it may turn out that the loans are sufficient to attenuate the economic damage. Even broad-scale loans would be an unprecedented fiscal experiment – but pose much less long-term fiscal risk than grants.

–Any future debt forgiveness for companies should give the government equity in those companies, and impose stricter conditions than those attached to the loans.

The specific design features of this program are matters for debate (including whether the banks should bear some share of the risks), and the right approach undoubtedly will vary from country to country. But the basic realities are the same everywhere: It makes no sense to impose social distancing without socializing the costs. And if we want to avoid irreversible economic damage, we can’t afford to wait.

—

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

The price tags for coronavirus relief packages in the United States keep getting bigger as the scope of the epidemic, and of the damage it will wreak on the economy, grows larger and more alarming with each day. Democrats and Republicans, some of whom have long preached fiscal restraint, are suddenly interested in throwing as much money at the epidemic as possible.

After a decade – and in the midst of a presidential campaign – when there were repeated arguments about what America can afford, policymakers appear to be ignoring issues of cost and deciding to spend, spend, spend.

So how can the nation suddenly afford to spend a trillion or more on the coronavirus?

The answer, in one word: debt.

As long as Congress authorizes it, the Treasury Department can issue as much debt as it needs to pay the nation’s bills. It does this by selling Treasury bonds to investors – foreign governments, banks, mutual funds, and many others who want to keep their money in a safe place. As long as investors keep buying American debt, the U.S. can keep selling it.

As of right now, the U.S. federal debt (not including government securities held by Social Security) stands at about 79% of annual gross domestic product. That’s high, historically speaking, but not a record – in the immediate aftermath of World War II, for instance, federal debt briefly spiked above 100% of gross domestic product.

As the coronavirus pandemic has send stock markets plunging in recent weeks, investors have signaled a rapacious demand for U.S. government debt.

At one point earlier this month, the 10-year Treasury bond traded as low as .54% during this crisis. When you account for inflation, that means that investors were effectively willing to lend money to the U.S. government for an entire decade at a loss.

Investors have been willing to do this because they’re looking for a safe place to park their cash at a time of massive uncertainty caused by the coronavirus pandemic.

Amid intense volatility in the bond market and panicked selling in recent days, the 10-year Treasury bond has moved up to .99%, as of Friday morning. That’s still extremely low by historic standards, so low that the Treasury Department is considering issue a 50 year bond for new spending.

The question is: How long will investors continue to lend money in this way?

Some countries, such as Japan, have lived with high debt levels for years, while others, such as Greece and Ireland, have seen financial crises as a result of their heavy burdens.

Few think that the U.S. debt burden right now is something that should preclude big spending to fight coronavirus. In time, when the economy recovers, the debt burden come could down thanks to a combination of economic growth, tax increases and spending reductions.

But before the coronavirus hits, the government was to set spend about $1 trillion more in 2020 than it collected. The coronavirus-induced recession and the new spending could double that this year.

A lot is riding on the continued confidence of global investors.

Falling demand for oil from the coronavirus outbreak – combined with the significant drop in prices sparked by Saudi Arabia’s actions to boost output and offer discounts following the breakdown of OPEC+ talks – means that Aramco will make even less money in 2020. Despite Saudi Arabia’s recent announcement that it intends to sell more oil, its profit is likely to fall substantially in 2020, which will force the monarchy to choose whether Aramco will honor its responsibilities to all shareholders as a publicly traded company or whether it will focus on funding the Saudi government.

This is an inflection point for Aramco and Saudi Arabia. The kingdom receives more than 60% of its revenue from the oil industry, and while it has options to help meet its budget – debt, austerity, or new taxes – it is truly reliant on Aramco payments. The government receives funds from Aramco mostly in three ways: a 50% income tax, a royalty on barrels of oil produced and a dividend. With low profit expected in 2020, the cash transferred to the government for the income tax will be limited. With low oil prices, the royalty payments, which are 15% of the price of Brent, will be exceedingly low. And if the company upholds its commitment to public shareholders, there would be less profit left to pay a dividend to the government.

In 2019, net income for Aramco was $88.2 billion, down $22.9 billion from the year before. With Brent now trading significantly below its price at the start of this year, Aramco is looking at lower profits just like every other oil producer. Aramco is taking steps to increase its sales of oil, but it is also offering discounts to do that. In all, revenue will be down significantly, and everyone at the company and in the government must know that. The company plans to drop its capital expenditures to between $25 billion and $30 billion, down from $32.8 billion in 2019, but this won’t be enough to counteract the lower revenue.

Lower profit isn’t the only bad news for the Saudi government. If Brent averages $35 per barrel, the government only receives $5.25 in royalties for each new barrel produced. Even if Aramco averages production of 12 million barrels per day – a major increase from earlier this year – the government would only earn $23 billion in royalties from crude oil. Comparatively, in 2018, Aramco paid the kingdom almost $55.6 billion in royalties and excise taxes. Unless prices rise, the royalty shortfall will be significant.

When it comes to dividends, the monarchy will have to make some critical decisions. In 2019, the company paid $73.2 billion in dividends, of which $3.9 billion were paid to public shareholders as a prorated portion since the December IPO. But Aramco committed to provide public shareholders with their share of a minimum of $75 billion in dividends, starting in 2020. The government, the largest shareholder, isn’t supposed to receive any ordinary dividends until after non-government shareholders are awarded their portion, based on a $75 billion total payout. However, with a lower profit expected in 2020, there may not be enough profit to cover the entire public shareholder dividend. On top of that, the Saudi government may need some sort of special dividend to fund itself.

Free cash flow fell to $78.3 billion in 2019 from $85.8 billion the year before. If Aramco’s board, at the direction of the monarchy, provides a special dividend to the government, it could be pulling money from Aramco’s cash reserves. This would decrease the value of the company’s shares and hurt the Saudi population, 20% of whom bought into the IPO, often on leverage. It would also hamper any plans for another offering of company shares to raise further capital for the government.

The Saudi monarchy, with the assistance of a board that isn’t independent, could revisit its commitment to provide the $75 billion dividend to public shareholders. The company also could decide to give the government leeway on the reimbursements owed to Aramco for the energy and petrochemicals it supplies to Saudi Arabia. In 2019 this equaled $35 billion. But these would betray non-government shareholders and hurt the stock price. If Aramco’s board of directors fails to provide the $75 billion dividend to all public shareholders, and, worse yet, if it funds the government at the expense of the company, it will mean that the monarchy has proclaimed Aramco to be a tool for its power and not public firm at all. And, because it is listed solely on the Saudi exchange, there will be no recourse for any shareholders, except for the loss of faith in the company and a stigma on its shares.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

From a purely political standpoint, presidents have tended to avoid claiming too much credit for the markets because stocks that go up inevitably come down. That’s a lesson Trump may be learning this week: On Wednesday, the Dow Jones industrial average came within 75 points of his Inauguration Day close.

Nearly all of the Trump-era gains, in other words, have been erased.

On Jan. 20, 2017, the Dow closed at 19,827. It soared over the next three years, peaking at 29,551 on Feb. 12 of this year. Within a span of weeks, the Dow plummeted roughly 10,000 points – nearly one-third of its value – as the coronavirus crisis has played out. On Wednesday, it shed another 1,334 points to settle at 19,899.

By comparison, according to investment research platform Macrotrends, the Dow was up 65% at the same point in President Barack Obama’s first term. Under President Bill Clinton, it had climbed 69 percent. The only president since Ronald Reagan to see worse market performance at a comparable point was George W. Bush, who was leading the nation through the aftermath of the Sept. 11, 2001, terrorist attacks.

Nearly all of these shifts are due to factors outside a president’s control. There are well-documented cases in which a market move can be unequivocally tied to the commander in chief’s actions. One of the most recent happened March 11, when Trump’s address to the nation caused Dow futures to drop “in real time with virtually each word Trump uttered,” as Philip Rucker, Ashley Parker and Josh Dawsey recently put it in The Washington Post.

Stepping away from politics, it is also worth noting that the stock market is a highly imperfect metric for the economy overall. Fully half of Americans own no stocks whatsoever, not even through such retirement accounts as a 401(k). Recent research has shown the media’s market obsession creates a portrait of the economy skewed toward the interests of the rich, leaving us with a poor understanding of how middle-class Americans actually are doing.

The reality is the rich are running much of the show. The median U.S. senator is a multimillionaire. Billionaires and the firms they own have an outsize influence on the economy, and market troubles like the ones we’re experiencing now have ripple effects that trickle down to decisions about who gets hired and who gets laid off.