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At the time of writing the United States owed $19.3 trillion in public debt. It owed another $5.9 trillion in debt held by its own agencies. Together, these figures come to a national debt of $25.2 trillion. With substantially more coronavirus spending almost certainly still to come, 2020 will be one of the most expensive years in U.S. history. As a percentage of gross domestic product (GDP), the coronavirus response has already pushed government spending to its highest levels since World War II (the single most expensive event in U.S. history). How is the United States going to pay for all of this?
It Won’t, and That’s OK

Fundamental to understanding the national debt is understanding a common mistake: The government does not follow the rules of household finances. One of the reasons for this is the importance of U.S. debt to global markets. Both private companies and foreign governments use American securities as a way to store capital, putting millions and billions of dollars into Treasury bonds, bills and notes, secure in the knowledge that they will get this money back.

In addition, foreign governments and companies buy U.S. securities as a source of U.S. dollars. The dollar functions as the world’s reserve currency, and owning, selling and collecting the interest on these assets ensures ready access to dollars.

These two factors (among others) have made U.S. debt instruments essential to global banking and business. For that to continue to work those debt instruments must continue to exist. If America paid off its debt, there would be no Treasury bonds to generate interest for foreign governments and no Treasury notes for companies to store value with. This is one of the reasons why the U.S. can generally get very favorable interest rates. The people who buy U.S. debt need those instruments almost as much as the U.S. does.

This is not a normative statement on the value of paying off debt. Nor is it a policy argument for whether or how much the U.S. should pay. The scope of issues raised by the national debt are complex and beyond the scope of this article, but also very real. It is a balancing act: When deciding how to approach the national debt, the government weighs its interest payments and debt concerns against the need to keep a substantial amount of U.S. securities in circulation. The result is that America will pay off some of its debt, but global finance depends on the country never paying off all of it.
Generating Revenue (Fiscal Policy)

When it comes to actually repaying borrowed money, the U.S. has two main options. The first is repayment through fiscal policy.

Repaying the debt through fiscal policy is what most people think of when they refer to paying down the debt. This means setting aside a portion of the federal budget and using it to make payments on principal and interest. To do this Congress would have to find the money to spend on debt service. Since the government has not run a budget surplus since 2001, this would require one of two things:

Tax Hikes

Taxes are the main form of revenue for the federal government, with most of its revenue coming from personal and corporate income taxes. (Since the 2017 tax cuts, individual income taxes have dominated federal revenue by a fairly wide margin.) By raising taxes the government can increase its revenue. This would close the gap between how much Congress spends and how much it takes in, allowing it to dedicate a greater percentage of the federal budget to debt.
Spending Cuts

The other way to manage deficits is through spending. By cutting spending, the government can also close the gap between how much it takes in and how much it spends. With less revenue earmarked for spending programs, Congress can then dedicate a greater percentage of the federal budget to paying down debt.
Printing Money (Monetary Policy)

An American flag

The second option for repaying the national debt is through what is known as monetary policy. This means that, rather than raising taxes to generate revenue, the government simply creates the money it uses to pay down debt. Since the U.S. borrows in its own currency, and can create more of that currency at will, it isn’t actually possible for the country to default on its debt except by choice. At any given time Congress can authorize the Treasury to print the dollars it needs to pay any debt.

Monetary debt management is not common in the United States, but nor is it unheard of. During the Great Recession the Federal Reserve did this through the process known as quantitative easing. It purchased U.S. debt instruments from banks and paid for those securities by crediting funds directly to their reserve deposits. So, for example, if a bank held $10 million in U.S. treasury bonds, the Federal Reserve might have bought those bonds and placed $10 million in that bank’s account with the Federal Reserve. The Federal Reserve would not transfer the money from elsewhere. It would simply enter the credit into that bank’s account, creating new money in the process.

This is a process which the Federal Reserve has already renewed during the current coronavirus crisis, buying U.S. debt and exchanging it for new money.

In the U.S., this is the preferred process for paying debt through monetary policy. Congress has not historically allocated new money into the budget for paying down debt directly, instead relying on the Federal Reserve.

The constraint to monetary debt service is inflation. By creating new money the government introduces additional capital into the marketplace. This can be a good thing under some conditions, and it can pass unnoticed in others. Often a national economy can absorb more money without any impact. In some cases, if a national economy is undercapitalized, adding new money can actually be very good for an economy.

However if the government introduces too much new money it will create an imbalance between the spending power of consumers and the ability of the economy to produce new goods and services. When this happens it starts an inflationary cycle, pushing up prices and eroding the value of savings. This can be difficult to stop once it gets started, which is why policymakers tend to be very cautious before authorizing the Federal Reserve to pay debt by fiat.
Inflate Away the Debt

"Inflation Ahead" signWhile inflation erodes buying power and savings, it also eats away at something else: debt. One of the features of an inflationary cycle is that, while the value of money goes down, the principal on debt stays the same. This makes it much easier to pay off debt as time goes on.

This fact has not been lost on the U.S. economy. In fact, the last time the United States borrowed this heavily to pay for a crisis, which was after World War II, inflation played a key role in making that debt go away. Inflation erodes the value of all long-term debt. It makes debt easier to pay.

Again, this should not be mistaken for a normative or policy argument about whether the United States should pay the national debt. However, it is important to understand this issue in its full context. The U.S. can pay the national debt through fiscal policy (raising revenue or cutting spending). It can also do so through monetary policy (increasing the money supply). However it must also balance those options against the twin realities that the value of this debt will erode over time, and that the global financial system needs at least some U.S. debt to survive.
The Bottom Line

The U.S. has borrowed heavily to pay for the coronavirus relief spending. It can pay that debt off by fiscal means or monetary means. The former entails generating revenue and cutting spending while the latter entails, essentially, printing new money. These are not mutually exclusive options for the government, as is evident in the government’s response to the pandemic.

Tenants of commercial premises have until the 23rd of May 2020 to request a moratorium on rent for businesses.

This was ap­proved by Royal De­cree-Law 15/​2020 to sup­port the eco­nomy and em­ploy­ment of Spain dur­ing the State of Alarm. This Royal De­cree-Law 15/​2020 was quite a com­plic­ated one cov­er­ing meas­ures of all kinds.

In­clud­ing a morator­ium of rent for busi­nesses. A morator­ium be­ing a tem­por­ary post­pone­ment. This de­pends on the type of owner of the prop­erty. And also if a vol­un­tary agree­ment between both parties (owner and ten­ant) on the morator­ium, tem­por­ary de­fer­ment or re­duc­tion of the rent could not be reached.

Formal Requirements
Companies
a) WHEN THE LAND­LORD IS A COMPANY OR OR LARGE PROPERTY HOLDER (more than 10 urban prop­er­ties or more than 1,500m2 of prop­erty use not in­clud­ing gar­ages and stor­age rooms). In this case up un­til 23rd May 2020, the ten­ant, whether a per­son or legal en­tity, may re­quest to the owner a morator­ium on the pay­ment
of the rent. This is rent due dur­ing the State of Alarm and its ex­ten­sions, month by month, and up to a max­imum of four more months after in case that period was in­suf­fi­cient for the situ­ation of eco­nomic vul­ner­ab­il­ity caused by COVID-19 to end.

No in­terest is ac­crued and agree­ment is ap­plied auto­mat­ic­ally. It does­n’t re­quire the con­sent of the land­lord. Al­though spe­cific formal and doc­u­ment­ary re­quire­ments must be met. The de­ferred rental pay­ments will be paid to the land­lord without any type of pen­alty and may be paid gradu­ally over the next two years max­imum. From the mo­ment the State of Alarm is lif­ted or from the end of the term of the four months re­ferred to above.

Not a Company
b) WHEN THE LAND­LORD IS NOT A COMPANY OR A LARGE PROP­ERTY HOLDER the same ap­plies. Un­til 23rd May, the ten­ant, whether a per­son or legal en­tity, may re­quest to the owner a morator­ium on the pay­ment of the rent due dur­ing the State of Alarm. And for its even­tual ex­ten­sions, month by month, and up to a max­imum of four more months after. (In case that period was in­suf­fi­cient in re­la­tion to the situ­ation of eco­nomic vul­ner­ab­il­ity caused by COVID-19).

Rquirements
c) FORMAL RE­QUIRE­MENTS

When the ten­ant is self-em­ployed: – they must be af­fil­i­ated and re­gistered, at the time of the de­clar­a­tion of the State of Alarm, in the Spe­cial Scheme
for Self-Em­ployed Work­ers. So that your activ­ity has been sus­pen­ded
due to the State of Alarm.

If your activ­ity has not been sus­pen­ded, you must prove a re­duc­tion in the billing of the cal­en­dar month prior to the one for which you re­quest the morator­ium. This needs to be by at least 75%. This is re­l­at­ive to the av­er­age monthly turnover of the quarter, with ref­er­ence to the pre­vi­ous year.

The ten­ant must prove the re­duc­tion to the land­lord, based on ac­count­ing in­form­a­tion, in­come and ex­pense. Which will ini­tially be sup­por­ted by present­ing a “re­spons­ible state­ment” if you do not have all the pa­per­work needed.

It’s hard to recall a time when market volatility has been as intense as it has been during the coronavirus pandemic. Between March 1 and March 31, 2020, federal, state and local governments imposed shutdown orders aimed at halting the spread of the virus, in the process shutting down nearly a third of the U.S. economy. That shutdown battered the stock market: In late February the Dow Jones Industrial Average was soaring above 29,000, but by late March it was struggling to stay above 18,000. Then, shortly after the passage of the CARES Act, stocks rallied. By the second week of April the Dow had begun climbing up off its March low and was ranging between 23,000 and 24,000.

In volatile times like these it takes a strong stomach to jump into the market – or to just stay in the market. But now, perhaps more than ever, it’s important to think carefully about how to manage your portfolio. Here are four key considerations to weigh as you decide what to do.

Think Twice Before Selling

The stock market has taken its biggest hit since 2008. Even bonds have taken a hit. It is widely acknowledged we’re already in a recession. During a recession it’s common to instinctively bail on the market. Many retail investors want to get their money out of assets that seem vulnerable to a freefall, which might make perfect sense from an emotional point of view.

But the market’s volatility will ease and economic fundamentals will once again dictate the market’s direction.
Unless you need your money in the immediate future or believe you have invested in industries unlikely to recover, for most investors it may be the wisest choice to keep your money right where it is. That’s especially true if selling right now will only mean converting hypothetical losses into real, actual cash. If you wait and let the market recover, you can regain that value. Indeed, those investors who stayed put while the bottom was falling out of the market have already seen significant recovery in their savings.

During the Great Recession it took the stock market two years to recover. There’s no good way to tell how long the post-quarantine recovery will take, or what dips it might experience along the way, but one thing is certain: Right now, selling out of fear or impatience could be a very good way to lose money.

Consider Buying

Many investors are focused on liquidity right now. For anyone worried about losing their job, which should be almost everyone, the last thing they want is to invest money they later need for rent. This is a very legitimate concern, and it’s important to balance your need for cash today against your need for cash in retirement.
At the same time, for anyone with money to invest, right now represents an extraordinary opportunity.

Some companies will come out of the coronavirus battered. Most, however, are currently deeply undervalued. Stock prices reflect market-wide fear and short-term loss of revenue more than any actual weaknesses in a company’s underlying business model. Coffee shops may be currently empty, but in a year or two or three they will be as busy as ever. Airlines may be struggling, but by next summer those planes will be full again.
Hold back the money you’ll need for an emergency. If you’re concerned about short-term cash, buy assets that you can sell off quickly. But if at all possible, a bear market is often the right time to buy.

At the same time, avoid trying to time the market’s recovery. It’s an emotional approach to trading. It plays on a combination of greed and the investor’s natural urge to just do something. Further, it depends on perfection.

Focus on Funds

The 2020 recession has turned the stock market upside down. For the next year professional investors will spend much of their time trying to predict specific industries and companies that will bounce back fastest. Some companies will flourish; others may not survive.

Retail investors looking to grow their money during the current market can mitigate risk by focusing on funds, either mutual or exchange-traded. Buy industry-specific funds if you would like to bet on that sector’s success. Or simply invest in market-index funds, then hold them while the economy bounces back, even if that takes several years.

For the foreseeable future, just about any degree of risk will be significantly magnified, particularly when it comes to buying individual equities. You can even that out by investing your money in the entire market – think the Russell 3000 – and letting the chips fall on specific companies where they may.

Buy in Stages

Just like there’s no good way to predict which companies will bounce back, there’s also no good way to predict a market timeline for the next year.
At time of writing the stock market had begun to rebuild its value (climbing back to over 23,000 points). This market recovery might continue if investors gain steady confidence in the government’s ability to fight the coronavirus and stabilize the economy. It might reverse in a period of days if investors change their mind about those factors. There’s no good way to tell.

The best way to mitigate that risk is by investing in stages. Buy new investments on a weekly basis, perhaps, or every 10 days. Pick a schedule that works for you and stick to it. If you’re buying bonds, use a ladder approach. If you’re buying stocks, considering dollar-cost averaging.

Like all investing strategies, this will mean passing up on some opportunities in order to mitigate risk. You will not be able to time the market and flood all your money in at its low point. To compensate for that, however, you will mitigate the risk of market volatility. No one knows when the stock market will bottom out, so by investing steadily over a period of time you’re more likely to buy in when prices are good.

Right now is a difficult time for investors, and particularly for anyone who needs to begin withdrawing assets immediately or very soon. Retirees and families with children headed off to college will face difficult months ahead as they figure out how to adjust long-laid plans. For everyone else, however, with a little bit of patience and prudent budgeting, this does not have to be a financial catastrophe. Instead, it could be the foundation for significant long-term gains.

The Bottom Line

A bear market means that cash will be tight, but investment opportunities are there if you can pursue them without risking your emergency fund. Invest for the long haul, resist the urge to panic-sell and hold tight. The market will be back.