Our economic system, Creditism, was fragile and on government life support before the Coronavirus hit the United States. Now it is in intensive care.
The new Macro Watch video describes the government policies that kept Creditism from collapse between the Crisis of 2008 and the end of 2019.
It then looks ahead to consider what it will take for Creditism to survive the Covid-19 Depression.
When Creditism was exposed to Covid-19 early this year, it was already in a weakened state, propped up by both massive fiscal stimulus and massive monetary stimulus, while asset prices were at a record high relative to income and, therefore, vulnerable to a sharp correction.
The Atlanta Fed’s GDPNow economic model currently estimates that US GDP will contract by 42.8% this quarter. From an economic policy perspective, what happens next depends almost entirely on how much the US government spends and how much money the Fed creates.
This is no time for frugality.
Government action during the weeks and months ahead will determine whether our economic system survives or disintegrates.
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