Below are the slides from my presentation at Beyond Covid on 12th June. The whole webinar can ve viewed here.The pandemic seems to me to resemble the "nuclear disaster" scenarios of my youth: hide in the bunker, then creep out when the immediate danger is over, only to find a world that is still dangerous and has fundamentally changed in unforeseeable ways. Rabbits hiding from a hawk is perhaps a kinder image, though hawks don't usually leave devastation in their wake. And I like rabbits. So this presentation is illustrated with rabbits, not nuclear bombs. This is where we were in March/April/May. Hiding in our homes, waiting for the danger to pass:And this is what central banks should have been doing then:To their credit, this is exactly what they did. By supporting sovereign finances
Frances Coppola considers the following as important: central banks, coronavirus, deficit, demand, Economics, Federal Reserve, helicopter drop, Monetary Policy
This could be interesting, too:
Lars Pålsson Syll writes MMT and the need for tax reforms
Lars Pålsson Syll writes Evidence-based policies
Bill Mitchell writes More analysis from the coronavirus dataset
And this is what central banks should have been doing then:
To their credit, this is exactly what they did. By supporting sovereign finances and warding off a financial crisis, they enabled fiscal authorities to take the extraordinary measures needed to keep people and businesses alive in their burrows.
Some economists mistakenly called for central banks to do demand stimulus such as helicopter money. But it was completely the wrong time for this. Why dangle carrots in front of the burrows to entice the bunnies out while the hawk is still flying overhead? Fortunately, central banks ignored them.
Even if all restrictions were lifted tomorrow, demand recovery would be slow because people have suffered a severe knock to their confidence. Indeed, suddenly lifting all restrictions could send the bunnies scurrying back into their burrows. The world has become a dangerous place.