Wednesday, April 1, 2020

Assorted Macro Musings

1. USA Today published my Op-Ed titled "Fighting the Coronavirus Pandemic: The Economic Front." In it, I make the case that the large relief package from the White House and Congress and the Fed's interventions are best seen as mobilizing for war: 
The proposed government outlays can be best thought of as part of a mass mobilization for war, just like the country did for World War II. Back then, the war was against foreign powers, and we mobilized factories, machines and troops to fight a physical foe. Today, the war is against a virus or an “invisible enemy,” as President Donald Trump has described. We’re mobilizing our health care industry and the ability for people to stay home in order to fight.
This fight against the novel coronavirus, like World War II, is also a two-front war. The first front is the public health battle against the virus. The second front is saving the economy from a debilitating wave of bankruptcies and liquidations as businesses are shut down and workers are sent home. This lockdown amounts to an economically induced coma, and most of new government funding is a form of life support to make it through this ordeal.
Mobilizing for war is very different than responding to a garden-variety recession. Consequently, this government relief should not be viewed as 'stimulus' but as life support for an economy temporarily put into an induced coma. 

2. The Mercatus Center published a new policy brief of mine where I call for Congress to grant the Federal Reserve the ability to do helicopter drops in very special circumstances. Specifically, the Fed should be allowed to do helicopter drops when interest rates hit their effective lower bound and the cash disbursements should be tied to a NGDP level target

3. We have increased the number of podcasts to two a week as the COVID-19 pandemic has taken off in the United States. The shows have focused on what policymakers can do and there have been a number of excellent guests. Below is a screenshot of some recent shows. Check out these episodes here.