COVID: the Virus is temporary, The Response - MMT - is PERMANENT

PRECOVID REALITY:

19 %  of the population, or nearly one out of every five U.S. households has a Negative Net Worth,.

53% of U.S. households have no emergency savings

63% Of Americans Don't Have Enough Savings To Cover A $500 emergency

33.6M civilian workers lack paid sick leave

27.9M non-elderly lack health insurance

21.3M lack adequate broadband

550,000 homeless are living on streets

Debt held by the public totaled 78 percent of the economy at the end of 2019 

COVID REALITY

                                         Massive Unemployment: How many and for how long – UNKNOWN

Decimated businesses not likely to rebound any time soon: Restaurant, Live entertainment, Travel, Retail and HOUSING.

How bad will the hit be for these and related businesses?  Nobody has any idea.  But a safe bet is that all those people who have been living paycheck to paycheck and with debt, will decide it is smart to start to save for the next crisis.

For now count on : A Half-Speed Economy: investment, consumption, trade, growth •

THE REPSONSE 

PHASE I: 

Congress allocated $2.2 trillion via the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

The new law gives the Treasury Department $454 billion to invest in a “special purpose vehicle” jointly with the Federal Reserve. The Fed will then allocate (or perhaps misallocate) that money in loans to private businesses.

But in fact, it’s way more than $454 billion. Here’s how two economists described the arrangement in a Wall Street Journal article:.

The expectation is that the central bank will leverage this money 10 to 1, enabling it to lend up to $4.54 trillion to companies.

That sum is more than all U.S. commercial and industrial loans outstanding at the end of 2019 ($2.35 trillion) plus all the new corporate bonds issued during 2019 ($1.41 trillion).

Thus, if this capital is all deployed by the Fed, and at rates that will surely crowd out private capital, all capital allocation in the U.S. in 2020 will be done by the Federal Reserve System, not by the capital market. This is the largest step toward a centrally planned economy the U.S. has ever taken.

AND understand this – for good and for bad – the Fed’s balance sheet is headed to north of $7 trillion. That will not mean “actively intervening in the market.” 

That will MAKE the CENTRAL BANK the MARKET. 

And the Federal Deficits, already out of control under Trump will balloon into the multi-Trillions.

And this is just phase I.

MODERN MONETARY THEORY IS HERE TO STAY.