Tuesday, March 03, 2020

Low interest rates are kind of a blunt tool for dealing with Coronavirus fears. Target new money toward true needs via government spending.

As stocks continue to slide and economic worries mount, it looks like the Federal Reserve is trying to shore up confidence with lower interest rates. Today on March 3 NPR Marketplace, I hear that lowering interest rates may not be the best tool to deal with this problem, but it's basically the only tool the Fed has.

I got to thinking that low interest rates mostly just cause people to buy property for investment purposes. Not really the solution we need. Just adds to long term property inflation.

What we need, to deal with this epidemic and the fear that goes along with it, are things like a stronger social safety net. Safety nets are what helps folks ride out things. It's better than going to work sick and spreading more disease.

This does bring up the whole question of investing in our people. Do workers have sick leave? Do workers have health insurance? Now that some people are being quarantined, do people have housing? In the news, it says that King County (Seattle area) has set up quite a few portable shelters to bring in homeless people who might be sick. Also they have bought a motel for quarantine use. Government spending. Other needs are things like research for a vaccine. Often it's government spending that comes to the rescue.

Seems like when the Fed prints money, it's needed to run the government. Maybe that's a new economic model, rather than raising taxes, print money and run the government that way. Government does an important job so it does need to be funded somehow. Some economists might be cringing, however.