Is the market too calm to blame for the delay of a new round of US stimulus plan?

The largest economic stimulus plan ever signed into effect in March in the United States expired at the end of July. Nearly three weeks later, the two parties in Congress have reached a deadlock over the new plan, but the market seems to be indifferent to it. On the 18th local time, the S & P 500 even broke the closing record set in February this year. Steven mnuchin, US Treasury Secretary, said on the same day that the Republican Party and negotiations on a new round of stimulus plan were still deadlocked. Mr. mnuchin has worked with House Speaker Nancy Pelosi and Senate minority leader chuck on several occasions Schumer) exchanged views on the scale and content of the plan. Both sides accused the other party of not being willing to carry out the identification day. The minutes of the Federal Reserve meeting showed that the U.S. government needs to spend more to avoid the economy from sliding into a longer or deeper recession when it is difficult for States to contain the epidemic. On the same day, US stocks closed lower. Wang Yong, a professor at Peking University’s School of international relations and director of the center for international political and economic research, told reporters at first finance and economics that although the two parties have different ideas on the rescue plan, many decisions in the United States will actually be greatly affected by the market. “There is no doubt that both parties and the executive branch of the government are highly concerned about the performance of the stock market.” “If there is a big reversal of the stock market trend, or a sharp rise or fall due to the judgment of the future, it will bring great pressure on policy makers, and they may be inclined to act quickly to reach an agreement,” Wang said According to Wang Yong’s analysis, the overall performance of the US financial market is good, not only because the US economy is still in recovery growth, but also because of the continuous “water injection” of the Federal Reserve since the outbreak of the epidemic. Since the U.S. epidemic intensified in March, the Federal Reserve reduced interest rates to nearly zero, increased its holdings by nearly $3 trillion to $7 trillion, and launched a series of emergency loan programs to support the market. Some analysts believe that, in general, if the market falls sharply in the run-up to the U.S. presidential election, it may push forward the economic stimulus plan, especially during the 2008 recession. In other words, the sharp decline in the market may bring the two parties back to the negotiating table as soon as possible, but if the market remains calm, it may lead to a longer deadlock. Matt Gertken, deputy head of geopolitics at BCA, a market consulting firm, told first finance: “financial markets are still in a state of complacency, but as the stalemate in negotiations lengthens, investors are increasingly likely to notice that. In fact, the US economy needs more stimulus. During these four months of recession, American household income was fully supported by the cares act, but it is now in the past. Without further support from the government, the impact on revenue will be huge. ” According to the minutes of the Federal Reserve’s July meeting, Federal Reserve officials are worried that the difficulty of controlling the epidemic in various states in the United States will worsen the bankruptcy situation of enterprises and slow down the decline rate of unemployment rate. But with interest rates already close to zero, there are also some local Federal Reserve chairmen who say it will be more meaningful for the fed to provide additional support when the epidemic is low enough to allow more business activity to resume. < p > < p > at the end of July, Republicans in the U.S. Senate proposed the “heals” bill, which is about $1 trillion. The specific measures include paying us $1200 directly to American families, paying us $200 weekly unemployment benefits before September, and granting the second round of wage security program (PPP) loans to the hardest hit small businesses. Then, fearing that the bill would not go through, Republicans came up with a “slimming version” that was expected to cost about $500 billion. However, it is the “Heroes” bill with a scale of 3.5 trillion US dollars. Last week, leaders said they would return to the negotiating table only if Republicans agreed that the government would eventually spend far more than $1 trillion. But so far, the two sides have made little progress in bridging their differences. According to Wang Yong’s analysis to the first finance and economics reporter, it is mainly due to the influence of the current election politics that the two parties have not reached an agreement on a new round of economic assistance plan. “It involves the basic supporters of both parties, so the interests are different. The size of the proposed rescue plan is relatively large, and mainly focuses on the low-income groups, but also favors the financial support of the local government. The Republican Party thinks that the scale of the relief is large and greatly reduces the unemployment benefits, because they are worried that the rich unemployment benefits will affect the enthusiasm of returning to work and production. ” Wang Yong said. In his opinion, the delay in reaching an agreement will affect the middle and low-income groups in the United States, especially those working in low-end service industries in cities. “The unemployment rate in the United States remains at a high level. According to the data released by the U.S. Department of labor in August, the U.S. unemployment rate was 10.2% in July. Although it has improved, it has not been completely controlled,” Wang Yong said. In this case, if the rescue plan can not be reached, it will first affect the middle and low-income groups, especially the tenants who do not have their own houses. ” < / P > < p > “(the trouble is) the federal government has only $44 billion to expand unemployment benefits, and the rest is expected to be funded by the States. But many states have no money at all to do it. Congress should eventually pass a new round of stimulus bills, which should be large enough to give good support to household income. ” “But it’s increasingly likely that we need some short-term market pain in the first place to drive policymakers to act efficiently,” gutkin said