Coronavirus: Keeping people at work and granting money may make a mark on currencies

Governments have reacted to the coronavirus crisis with extraordinary fiscal packages. Countries that keep the people at work and earning money may come on top, according to FXStreet’s analyst Yohay Elam.

Key quotes

“Helping keep workers on the payroll means employees do not need to run and claim jobless benefits and instead have the confidence that their pay is guaranteed for a while. That encourages consumption.

“Employees receiving additional unemployment benefits and for a longer period of time encourage employers to fire workers so they can claim unemployment benefits. The detachment of the worker from the firm undermines confidence and discourages spending.”

“It would be better to grant funds to keep these firms alive, in some cases by nationalizing them, than by lending money. It is better to have either healthy companies or kill them off altogether. Zombies may slow the recovery. It also reduces maintenance costs in the current emergency state and also later on.”

“Keeping people at work and granting money has advantages over propping unemployment benefits and lending money. That may make a mark on currencies.”