Credit Lines
When a crisis hits, hand-to-mouth households typically have to take on more debt -- assuming someone will lend to them -- or make premature withdrawals from retirement accounts. The latter course often involves selling investments at the worst possible time, after they’ve dropped in value.

In the U.S. right now, it’s getting tougher for recession-hit homeowners to borrow against their property. Lenders have tightened their standards, with Wells Fargo & Co. and JPMorgan Chase & Co. announcing in April that they’ve suspended new home-equity lines of credit.

When it comes to tapping retirement accounts, policy makers have been easing the path. Under the CARES Act, a pandemic relief plan approved by Congress in March, Americans have the option to withdraw as much as $100,000 this year without the usual penalties.

At least in the early weeks, it looks like not many opted to do so. Fidelity Investments said that 1.2% of its retirement-plan customers, or about 295,000 people, had taken a CARES Act distribution in May (the median sum was $5,000). Vanguard Group cited an April figure of “slightly less than 1%.”

‘Stay Afloat’
There’s a good reason for that reluctance, especially for older workers who are short of time to replenish any funds they withdraw, said Teresa Ghilarducci, an economics professor at the New School for Social Research in New York.

As an alternative, “debt is going to look very attractive to people,” she said – whether on credit cards or against homes. “If you don’t have liquidity, you have to borrow liquidity.”

In an extended downturn, even many of those who did have liquid savings may find themselves living hand-to-mouth and thinking of ways to access illiquid wealth. That’s one reason why so many Americans are glued to the economic numbers -- and cheering the ones that suggest the country may pull off a rapid V-shaped rebound.

In Wisconsin, the official re-opening happened in mid-May. But most of Chesky’s former customers are still working from home and her boarding business, usually a huge source of revenue over the summer, is on track to net her less than $1,000 next month.

For the present, she’s waiting on government help – and for the future, she does see one glimmer of hope: the huge number of people who seem to have adopted dogs while in quarantine. Eventually, she figures, their owners will be back at work.

“I see potential opportunity coming,” she said. “If I can stay afloat until then.”

--With assistance from Suzanne Woolley, Peter Eichenbaum and Steven Crabill.

This article was provided by Bloomberg News.

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