The signal the Fed is sending to everyone in the market is: don't worry about risk or bad decisions! As long as you are in the same boat as other financial institutions, the Fed will rescue you. Even if we survive this new crash (I still remember 2008), the economy seems to be headed to destruction in not such a long term.
If businesses had to run at all times with the contingent risk of a pandemic built into their cash flow model, virtually no business in the travel, tourism, or entertainment sectors would ever be funded.
How would you operate, say, a restaurant with the pandemic risk on your balance sheet? You’d need, what, twelve months of cash available for a rainy day?
All of the dynamism of the marketplace would evaporate and we would have Soviet-style restaurants.
You could buy insurance for it. Wimbledon is getting a $140 million payout from their pandemic insurance because they had to cancel.
That said, one could also say the taxes businesses pay to the government are like insurance premiums for acts of God and at that point the government can step in...
