Supply shock is what armchair economists talk about, because it sounds complicated and smart. The real danger is a fall in demand. Central banks and governments should act now.https://t.co/GFNyyWTJzL https://t.co/1xkE32D5qj
— Jan Musschoot (@JanMusschoot) March 2, 2020
This is the bottom line. This is an exogenous shock that creates Knightian uncertainty and will likely increase savings rates and risk aversion. The optimal response is for governments/CBs to forcefully and preemptively offset the increase in private risk. Whatever it takes. https://t.co/zYM8qfLfIx
— Angel Ubide (@AngelUbide) March 2, 2020
The ECB is run by paupers and it shows.https://t.co/hS3VW2DscX https://t.co/alKin5Y56S
— Jan Musschoot (@JanMusschoot) March 3, 2020
Time for a European solution to the economic threat of the coronavirus. Banks have to keep lending to businesses. @ecb, @EU_Commission and @EBFeu should replicate success of 2009 Vienna Initiative. This is your time to shine, @Lagarde @vonderleyen @eucopresident ! https://t.co/VBRuMYaZu2
— Jan Musschoot (@JanMusschoot) March 3, 2020
This notion that Fed has "limited ammunition" is by collective public choice. Fed/Treasury could/should underwrite bank lending to small/med businesses with (hopefully) temporary cash-flow problem and skittish creditors. https://t.co/1lxYrvzvMB
— David Andolfatto (@dandolfa) March 3, 2020
There are hundreds, if not thousands, of economists in good standing throughout the Fed, academia, and private forecasting, all discussing a *demand* shock.
— Alan Cole (@AlanMCole) March 3, 2020
To respond to us with "you can't solve a *supply* shock with demand-side tools" is a malicious mischaracterization.
Read this on the market freakout
— Joe Weisenthal (@TheStalwart) March 4, 2020
The problem is not that Powell didn't do enough. The problem is that nobody else is doing anything.
Nothing from the White House or Congress. Nothing from the ECB, BOE etc. Nothing from Germany etc.https://t.co/VQAXTHi8Sk
This reminds me of a historical paper I wrote on how the Bank of France smoothed the negative impact of a negative supply supply shock not by interest rate cut but by making more counterparties eligibility to the discount window. A thread & the paper https://t.co/G3JKjcAMDd https://t.co/GRpnVq1cdS
— Vincent Bignon (@BignonVincent) March 4, 2020