The Financial Crisis Arising From COVID
As a result, financial markets have been under great stress, prompting a quick reaction by the Federal Reserve.
As companies, from airlines to retail, come asking for bailouts and other types of assistance, it is important to resist simply handing out money. Conditions can be attached to make sure that bailouts are structured in ways that transform the sectors they’re saving so that they become part of a new economy – one that is focused on the green new deal strategy of lowering carbon emissions while also investing in workers, and making sure they can adapt to new technologies. It must be done now, while government has the upper hand.
Quantity rationing did not eliminate the supply constraint per se and it did not constitute a benign, let alone fair, policy. Most importantly, it did not guarantee that those who really needed liquidity effectively received it. Eventually, the only truly successful policy response came during the autumn of 1847. When the financial panic reached previously unseen levels of severity, the British government gave the Bank temporary permission to breach its minimum reserve requirement. The mere publication of the declaration of suspension led to a sudden end of the runs.
Could Covid-19 create its own structural legacy? History suggests that the global economy after a major crisis like Covid-19 will likely be different in a number of significant ways.
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