This Time Really Is Different

Professor Rogoff estimates that a global recession is “at least 80 percent likely,” with China bearing much of the brunt and other emerging-market countries likely to be severely pounded.

Compared with most other countries, the United States is in good shape, despite its evident problems, several economists said. The U.S. dollar has again been a haven, said Eswar Prasad, a Cornell and Brookings Institution economist. If anything, he said, “the financial power of the United States has grown in stature since the 2007-2009 financial crisis.”

That power would be wasted, Professor Rogoff said, if the United States did not use its resources both to aid other nations and provide succor to the impoverished people within its own borders.

“I wouldn’t blink an eye if we spent $500 billion or $1 trillion on fiscal stimulus, if it is directed at the people who need it most,” he said.

Central banks are providing relief by lowering core interest rates. But rates are already near zero in the United States, and even lower than that for many European and Asian bonds. There’s only so much the banks can do. So some officials and scholars are contemplating even more radical experiments than the banks have engaged in over the last decade, like buying corporate debt in the United States or even issuing digital money that would pay variable interest rates, targeted to the borrower.

Governments are beginning to try to provide economic balm with fiscal stimulus. There’s nothing wrong with that in principle, but the classic remedies weren’t designed for a coronavirus.

A payroll tax cut, proposed by President Trump, won’t set off a wave of spending if people are huddling at home. Huge amounts of spending won’t help workers in Wuhan or Milan get back to their factories if they are quarantined. Nor will it aid service sector workers in the United States who lose their jobs if people stop going out to eat because they simply don’t know if they have been infected with the virus. And it’s not clear how vital small businesses, which are suffering enormous losses, can be adequately bolstered.

Article source: https://www.nytimes.com/2020/03/12/business/strategies-coronavirus-pandemic-different.html