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$6T has been created, but an unknown $X trillion has also been destroyed by a sharp and sudden decrease in economic activity, including a contraction of credit.

$6T has been created, but an unknown $X trillion has also been destroyed by a sharp and sudden decrease in economic activity, including a contraction of credit. So... who knows. Maybe it's enough, maybe it's too much, or maybe it's too little -- it's too early to say.

IAmEveryone 7y ago
What’s been destroyed is not some amount of $, but of productivity as measured in $.
ttul 7y ago
Thank you for pointing this out. Secondly, just what the hell is the central bank supposed to do? Had they not intervened hard in debt markets, we would have seen bank runs and mass chaos in financial markets, making things we take for granted (such as paying for stuff at the grocery store) totally fail over night. I am wayyyy less worried about the magnitude of the Fed’s intervention than I am about what might have happened otherwise.
- malandrew 7y ago
  Lately, I've been amazed at the number of people that have been arguing in favor of allowing "otherwise" to happen.
  - WanderPanda 7y ago
    Everyone is afraid of „otherwise“ without anyone having witnessed it before. My guess is, we are trading short / mid-term stability for decreased long-term efficiency / productivity
    - wait_a_minute 7y ago
      Which in my opinion is acceptable, because it's the short-term chaos that is the most likely to bubble out of control and turn into a long-term chaos. Imagine the chaos that would besiege the world if there was a risk of bank runs and people not even being able to pay for food anymore. We're only three to six missed meals away from absolute anarchy and violence in the streets.
      - thoughtstheseus 7y ago
        The Fed is doing a great job with current tools but they're a bandaid for bigger issues. It's not a question of if this becomes an issue it's a question of when. The longer you let the bubble build the harder it is to deal with it. Economic stagnation similar to Japan... is tough to deal with.
  - brankoB 7y ago
    Beats continuing to bailout the corporations instead of the people.
scott_s 7y ago
This is why I dislike that some have characterized the bill as a "stimulus." The point of stimulus efforts is to stimulate the economy, implying that it's ready to be stimulated. It's not. The $6 trillion is life support. We've put the economy into a medically induced coma. The $6 trillion is what we need to keep the economy alive, barely, while we try to get Covid-19 under control. Once we've done that, we'll need separate stimulus to get out of a depression.
- malandrew 7y ago
  Medically-induced coma and life support is a far better analogy. Thanks for this.
WanderPanda 7y ago
Decrease in economic activities = decrease in goods and services offered + increasing amount of Money > Inflation (inevitable?) Demand should stay the same for many products and services and decrease for some (cyclic) goods like machinery etc. Time to get into Gold, Bitcoin and (non-cyclic) Stocks?
- lkrubner 7y ago
  Decrease in economic activities = decrease in goods and services offered I really hope you meant this as a joke. Did you mean to use an equal sign? The subset symbol might be defensible: decrease in goods and services offered ⊆ decrease in economic activities The forced withdrawal of labor is one type of supply-side shock. If it lasts, it could cause some inflation. One could try to compare it to the OPEC oil shock of 1973. But significant inflation could only occur if people developed an expectation that the resource will remain scarce for the long-term. In 1973, there was the wide-spread belief that oil would remain scarce for a long-time. In the present time we can ask, is the forced withdrawal of labor a permanent change to the economy? Will this last 10 years, or 20 years? Should businesses rebuild their business models around the assumption that labor will remain scarce for a generation? You'd have to believe that's true, if you wanted to compare the current forced withdrawal of labor to something like the 1973 OPEC oil shock.

IAmEveryone 7y ago

What’s been destroyed is not some amount of $, but of productivity as measured in $.

ttul 7y ago

Thank you for pointing this out. Secondly, just what the hell is the central bank supposed to do? Had they not intervened hard in debt markets, we would have seen bank runs and mass chaos in financial markets, making things we take for granted (such as paying for stuff at the grocery store) totally fail over night. I am wayyyy less worried about the magnitude of the Fed’s intervention than I am about what might have happened otherwise.

malandrew 7y ago
Lately, I've been amazed at the number of people that have been arguing in favor of allowing "otherwise" to happen.
- WanderPanda 7y ago
  Everyone is afraid of „otherwise“ without anyone having witnessed it before. My guess is, we are trading short / mid-term stability for decreased long-term efficiency / productivity
  - wait_a_minute 7y ago
    Which in my opinion is acceptable, because it's the short-term chaos that is the most likely to bubble out of control and turn into a long-term chaos. Imagine the chaos that would besiege the world if there was a risk of bank runs and people not even being able to pay for food anymore. We're only three to six missed meals away from absolute anarchy and violence in the streets.
    - thoughtstheseus 7y ago
      The Fed is doing a great job with current tools but they're a bandaid for bigger issues. It's not a question of if this becomes an issue it's a question of when. The longer you let the bubble build the harder it is to deal with it. Economic stagnation similar to Japan... is tough to deal with.
- brankoB 7y ago
  Beats continuing to bailout the corporations instead of the people.

scott_s 7y ago

This is why I dislike that some have characterized the bill as a "stimulus." The point of stimulus efforts is to stimulate the economy, implying that it's ready to be stimulated. It's not. The $6 trillion is life support. We've put the economy into a medically induced coma. The $6 trillion is what we need to keep the economy alive, barely, while we try to get Covid-19 under control. Once we've done that, we'll need separate stimulus to get out of a depression.

malandrew 7y ago
Medically-induced coma and life support is a far better analogy. Thanks for this.

WanderPanda 7y ago

Decrease in economic activities = decrease in goods and services offered + increasing amount of Money > Inflation (inevitable?) Demand should stay the same for many products and services and decrease for some (cyclic) goods like machinery etc. Time to get into Gold, Bitcoin and (non-cyclic) Stocks?

lkrubner 7y ago
Decrease in economic activities = decrease in goods and services offered I really hope you meant this as a joke. Did you mean to use an equal sign? The subset symbol might be defensible: decrease in goods and services offered ⊆ decrease in economic activities The forced withdrawal of labor is one type of supply-side shock. If it lasts, it could cause some inflation. One could try to compare it to the OPEC oil shock of 1973. But significant inflation could only occur if people developed an expectation that the resource will remain scarce for the long-term. In 1973, there was the wide-spread belief that oil would remain scarce for a long-time. In the present time we can ask, is the forced withdrawal of labor a permanent change to the economy? Will this last 10 years, or 20 years? Should businesses rebuild their business models around the assumption that labor will remain scarce for a generation? You'd have to believe that's true, if you wanted to compare the current forced withdrawal of labor to something like the 1973 OPEC oil shock.