In rich countries, most of the economic effort has been directed towards calming financial markets. On March 3rd America’s Federal Reserve cut rates a fortnight before its monetary-policy meeting, and by an unusually large half-a-percentage point. The central banks of Australia, Canada and Indonesia have also acted. The Bank of England and the European Central Bank are both expected to loosen policy, too.
Yet this slowdown is not a textbook downturn. Lower rates will ease borrowing costs and shore up sentiment, but no amount of cheap credit can stop people falling ill. Monetary policy cannot repair broken supply chains or tempt anxious people into venturing out. These obvious limitations help explain why stockmarkets failed to revive after the Fed’s cut.
Better to support the economy directly, by helping affected people and firms pay bills and borrow money if they need it. For individuals, the priority should be paying for health care and providing paid sick leave. The Trump administration is considering paying some hospital bills for those with the virus. Japan’s government will cover the wages of parents who stay at home to care for children or sick relatives; Singapore’s will help cab drivers and bosses whose employees are struck down. More such ideas will be needed.
For companies the big challenge will be liquidity. And although this shock is unlike the financial crisis, when the poison spread from within, that period did show how to cope with a liquidity crunch. Firms that lose revenues will still face tax, wage and interest bills. Easing that burden, for as long as the epidemic lasts, can avoid needless bankruptcies and lay-offs. Temporary relief on tax and wage costs can help. Employers can be encouraged to choose shorter hours for all their staff over lay-offs for some of them. Authorities could fund banks to lend to firms that are suffering, as they did during the financial crisis and as China is doing today. China is also ordering banks to go easy on delinquent borrowers. Western governments cannot do that, but it is in the interest of lenders everywhere to show forbearance towards borrowers facing a cash squeeze, much as banks did to public-sector employees during America’s government shutdown in 2018-19.
There is a tension. Health policy aims to spare hospitals by lowering the epidemic’s peak so that it is less intense, if longer-lasting. Economic policy, by contrast, aims to minimise how long factories are shut and staff absent. Eventually governments will have to strike a balance. Today, however, they are so far behind the epidemic that the priority must be to slow its spread.
1. deter someone from doing 阻止
Supporters of the death penalty argue that it would deter criminals from carrying guns.
2. Fortnight 两周
I hope to be back in a fortnight.
3. lay off 解雇
100,000 federal workers will be laid off to reduce the deficit.