Tuesday, March 17, 2020

Dan's Back: "The case for massive corona-stimulus"

Mr. McCrum was Editor of FT Alphaville while Ms. Kaminska was away.
Then he fell under the dark spell of an investigative Svengali and got sued by WireCard.
He will prevail in the lawsuit.
Now he's back at FTAV.
How's that for a mini-bio?
From FT Alphaville:
UK chancellor Rishi Sunak will on Tuesday announce the economic support package that was noticeably missing from the government’s encouragement on Monday for the public to abandon large parts of the service economy.

Just in time to embolden timid hearts at the Treasury, a brief paper from Emmanuel Saez and Gabriel Zucman at Berkeley university laid out the urgent case for action on a giant scale:
The coronavirus threatens the world’s economic life. The most important message that needs to come from heads of state immediately, even before any new law or complete implementation details are provided, is: “Do not lay off your workers or liquidate your business. Government will pay your idle workers and your necessary maintenance costs while you are shutdown. Government money is coming soon.”1 This is crucial to stanch the flow of mass layoffs and business destruction that is already starting.
The academics estimate that US output will fall 30 per cent, and if the interruption to life lasts for three months, that translates to a 7.5 per cent drop in GDP – a severe recession.

Such an outcome demands government intervention on moral, practical, and economic grounds. As Jim Reid, strategist at Deutsche Bank put it on Tuesday, “global economies have effectively been put on war footing but without the usual intense wartime economic activity.”

Everyone has been asked to help prevent widespread deaths at a personal cost. The government’s job is to prevent the temporary economic hit resulting from those costs having a permanent impact.....

He's right about this story too.