Odds Say US Will Implement Negative Interest Rates by 2021, American Will Be Next Airline to File Bankruptcy

• The United States government has talked about implementing negative interest rates
• Countries like Denmark, Japan and Switzerland already have negative interest rates in effect
• See the odds that the United States drops interest rates into the negatives by 2021

The United States government is doing everything in its power to fight off the economic impact of the COVID-19 pandemic. It has already lowered interest rates in hopes of helping people and companies like airlines and casinos get easier access to money to survive.

Will it work? Let’s take a closer look at some prop bets related to the topic.

Odds The United States Implements Negative Interest Rates by 2021

Odds as of Mar. 19.

There has long been a conversation about negative interest rates in the United States and maybe the coronavirus pandemic might finally be what pushes the country into this territory. This actually isn’t a new theory and many people felt that the United States – as well as many other countries – were heading in that direction anyway.

Many modern, advanced countries already employ this method as Japan is at -0.10%, Sweden is at -0.30%, Denmark is at -0.70% and Switzerland is at -0.80%. This method is used as a tool to encourage economic growth and the math behind it is quite simple: those who hoard money in a bank account will be penalized.

One thing that really helps the economy thrive is when money moves. That means either investing (in the stock market, real estate, research and development) or doing anything with the money besides keeping it stagnant. They’ve already dropped the interest rates from 1.75 to 1.25 and now to 0.

Beyond that, the world has become so debt-heavy that negative yields are actually a bonus to the governments who have to pay off their massive debts. With $16 trillion in worth of global debt (before the COVID-19 pandemic), governments would love to have smaller rates than anything that climbs to 4%, 5% or 6%. Each tiny percentage point has huge ramifications.

Now when you add in the COVID-19 pandemic, the United States and other economies are going to want to kickstart the economy. Of course, the United States was roaring before but dropping interest rates is going to be one tool they have at their disposal to get things going again.

Whoever is president at the end of this year, I would expect them to dip into negatives. This means businesses will borrow, young families will borrow to buy homes and students will face less of a burden for loans. This could all prove to be disastrous later down the road but we’ll save that conversation for another day. For now, bet on interest rates going negative by 2021.

Odds On Which Major Airline Announces Bankruptcy First

Odds as of Mar. 19.

One of the industries that’s been hit hardest by the coronavirus pandemic is the airline industry as they never would have imagined this type of a nightmare scenario. Most businesses prepare for a recession, which is usually a 20% decline in business – maybe 30% at worst. In no one’s wildest dreams did they ever fathom a flat drop to 0%.

The other big issue plaguing the airlines is their stock buyback strategy, which is looking pretty ridiculous at this point. Over the last 10 years, airlines have used 96% of their cash for buybacks, which is pretty painful considering they could have saved at least some of that money for a rainy day. Now all of them need to be bailed out.

Airlines are seeking about $50 billion in bailouts, which isn’t a huge number in the grand scheme of things, but it could be a political fight to save them. Many people will view this as corporate greed/the rich getting richer. Had the common man made these types of decisions, no bank would bail them out. But corporations won’t face the same repercussions.

Forgetting the bailout, though, the bigger issue is when they can get back to business. If it’s in a couple of weeks or even a month, they’ll probably be OK. If it’s anything longer than that, a bailout might not even save them.

Delta has already announced layoffs of contractors and many other airlines around the world are in deeper trouble. Alitalia has been nationalized by the Italian government (to save them), El Al has had massive layoffs and Norwegian Air has laid off 90% of its staff and is on the brink of collapse.

At the same time, almost all airlines are successful, thriving businesses and this is just a catastrophe that nobody could have foreseen. This is just a liquidity crisis that could be protracted but once things are back to normal, they’ll be back to making money and can repay the loans.

That being the case, I wouldn’t bet on this prop at all. Instead, I’d probably wait a little bit and invest in the companies via the stock market. Like the banks in 2008, they’ll all be saved.