Time Suspended: Some Ideas On How To Deal With The Economic Crisis Caused By COVID-19
Long/Short Equity, Value, Contrarian
Seeking Alpha Analyst Since 2018
For our followers that are interested in the topic of the current COVID-19-induced economic crisis . . .
We have been sounding the alarm about the upcoming "tsunami" of evictions, foreclosures and bankruptcies and have put forth a solution, which we call "Time Suspended”, to contain the damage caused by the crisis and accelerate the economic recovery.
Our proposal drastically reduces the amount of direct stimulus money the government must spend to navigate the country out of the crisis. In fact, it would allow for a more effective, targeted use of any funds that would be deployed.
The measures we suggest are the following:
1. For everyone (businesses, households, local governments, …): set ALL interest rates on ALL financial assets to 0% while the crisis perdures and concomitantly setting a grace period for any installment, and accordingly extending all contracts by the same amount of time.
2. For businesses: set all rents and leases on business real assets to 0 (or the proportion of actual remaining business revenues). Relieved of capital costs, businesses will be able to focus their liquidity on essential, productive expenses, such as employees, utilities, essential maintenance, …, giving them the necessary oxygen to survive the crisis.
3. For households: we advocate setting a sliding scale, or a flat (SAY) $1K/month reduction in rents which would go a long way in providing relief to the most vulnerable households.
The Time Suspended measures are not a mere variation of what is already circulating within Congress, the Administration and Economics circles! Crucially different and the cornerstone of the proposal is that this freeze must be applied throughout the entire economic chain in order to balance out the burden and have the stimulus naturally flow where it is most effective.
Our paper illustrates how the measures implemented so far, as well as those being considered as part of another “stimulus” package, merely flow straight through to the landlords and the passive holders of financial capital - without stimulating anything!
Instead, in order to be effective, any stimulus program must be squarely and intelligently aimed at avoiding a full cascade of evictions, foreclosures and bankruptcies.
Our paper expands on this brief presentation and explains the effects of "Time Suspended" on the various types of economic agents, the government, and the economy in general.
Dr. Luca Donà, PhD
mathematician: Economics, Finance, Game Theory, Risk
Prof. Raphael Douady
research Professor at University of Paris I: Pantheon-Sorbonne;
- Academic paper on SSRN
'Time Suspended' A Self-Organizing Solution to Ensure the Economic Recovery
- Article on LinkedIn
"Time Suspended" - freeze interest and rents in order to accelerate the Economic Recovery
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