To be clear: exposing people to a deadly virus in order to achieve herd immunity is insane. Policy makers and doctors who seriously considered this option should be tried for crimes against humanity. Millions would die, even with the best medical care.
This post was originally intended to be published elsewhere, but ultimately wasn’t. Note that this article is only about helicopter money. However, governments and central banks urgently need to do much more. The state should bail out all businesses. Businesses should hold on to their employees even if they cannot work so the economy can have a V-shaped recovery. The government should pay the workers. I also have other proposals for the ECB, see here and here.
I haven’t posted on the blog in a while, but I’m very active on Twitter.
Here’s my 3 point plan for the ECB:
(1) The ECB should issue bonds, which are risk free (the ECB cannot default on euro liabilities). It should buy every sovereign bond trading at a yield of 40 basis points or more above the yield on the ECB bonds.
(2) The ECB should set the interest rate on TLTROs at -5% until six months after the coronavirus public health crisis is over.
(3) The ECB should do helicopter money as soon as businesses are operational again, because the outlook for price stability is bleak.
The ECB, government leaders and the banking sector must act immediately to stop the financial panic caused by the coronavirus.
A recession can still be avoided.
Banks should provide bridge loans to businesses suffering from the corona shock.
The ECB should do a TLTRO-like operation, providing cheap funding proportional to banks’ SME/corporate credit portfolios. Make the terms of the ECB loans conditional on coronavirus metrics. For example: banks should repay 4 months after the last new COVID-19 case is detected in the EU.
If Europe’s leaders fail to act decisively, the financial costs will snowball.
Maar het gelanterfant van beleidsmakers misschien wel.
De directe impact van het coronavirus op de economie is beperkt. In tegenstelling tot bij rampen als orkanen of aardbevingen is er geen materiële schade. Het virus heeft nog maar weinig mensen werkonbekwaam gemaakt.
Als men er in slaagt om de verspreiding onder controle te houden, kan de economie zich snel herstellen.
Het grootste risico is dat politici en centrale bankiers de financiële onzekerheid uit de hand laten lopen. De beurzen hebben klappen gekregen. Sommige getroffen bedrijven zullen uitstel van betaling nodig hebben.