Monday, April 20, 2020

The stimulus bill tried to do too many things at once. Two strategies are better. One to survive shutdown and the other to restart business.

I think the virus recover package was hastily cobbled together by Congress. Glad they did something, but it really needed to be two strategies for two different times.

The first strategy would be money so people and businesses can pay the rent, mortgages, overhead, whatever to stay put and not work. Also money for the front line people and businesses, like medical care and vaccine research that still need to work. Phase two would be stimulus to bolster consumption, a bit, after business is allowed to open up again (whenever that would be).

The two concepts were conflated in the bill that passed.

Depending on what epidemiologist specialists say, we may need to figure out how to put a big part of our economy on hold for a long time. This is a hardship for people and a lot of businesses; especially small businesses. We may need to print money to keep people solvent. Printing money can cause inflation, in normal circumstances, but this is uncharted territory. To keep the virus from spreading, demand needs to stay low at places like restaurants, shopping malls, airplanes and so forth. Demand normally pushes inflation. This would be uncharted territory (I guess I said that before). Money is needed to maintain lease payments, mortgages, insurance premiums, and therefore bank solvency on up the food chain; so to speak.

The type of stimulus to restart business is a different thing. It would need to be in a second bill, but who knows when that bill would be needed. As they say, "the virus sets the timetable."

1 comment:

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