Last Train to Fast Recovery

The anticipated evolution of the economic crisis caused by the COVID-19 pandemic is playing out. While the resilience of the US economy has allowed for a bounce from the extreme lows of last spring, the core issues have not been addressed. For entire sectors the situation will get much worse and damage will become permanent unless the right kind of action is taken now!

Prior relief has been exhausted … without providing a structural solution

The near 3-trillion dollar relief package(s) passed since last spring has come and gone. It HAS provided relief but the form in which these relief resources have been given constrained its duration and effectiveness. Understandably, Congress is reluctant to pass another mammoth package — given how little bang has been provided by the huge buck.

The situation is back to critical for many

Necessity and ingenuity have allowed businesses in many sectors to resume decent economic activity. However, as the medical emergency perdures and confinement measures are extended, households and entire important economic sectors will see the crisis reach breaking levels.

Landlords and financial stakeholders are the next shoe to drop

So far, most residential and commercial landlords, and holders of financial capital have been only indirectly affected. Many may have hoped to emerge little scathed by the crisis — but reality is about to hit hard — as can be observed by the precipitous decline in commercial rents and the exploding volume of vacancies in the office real estate space.

Rent Relief — a one-legged solution

Rent relief programs that have been suggested take a stab to address the core issue:

“Time Suspended” — a comprehensive solution

Thus we see that a structural solution is needed to cover all the bases. It must provide rent and interest relief at the end of the chain; but it must also be smart about how the burden is partially shifted onto other economic agents. It can neither absolve landlords and financial agents from shouldering any of the burden, but it also cannot simply shift the burden onto just the next level. The burden needs to be widely shared so that each economic agent only bears the smallest possible fraction of it.

Luca Donà, PhD mathematician: Economics, Finance, Game Theory, Risk @LucaDonaV