Why "way too long"? Inflation was not a problem so why exactly did rates need to rise to cool things down?
The ECB did in fact raise rates at one point... and the EU recovery stalled. Krugman for one was very critical of raising them too soon, and he turned out to be correct.
Where does cash have to go? In Germany/Europe you have a culture of saving, so everyone stashes in "safe" accounts, and so government bond yields are at zero or even negative. Those folks would do better, both financially and for the health of the economy, to go with equities. German/EU governments would do well to spend more as well.
In the US people seem to be more culturally tuned to spending, and is "the" market to invest in world-wide, so a lot of folks are putting their money there. Potentially bidding up prices.
This is why Krugman is calling for a "permanent stimulus":
> OK, if you’re still with me: I hereby propose that the next U.S. president and Congress move to permanently spend an additional 2 percent of GDP on public investment, broadly defined (infrastructure, for sure, but also things like R&D and child development) — and not pay for it.
> The starting point for my argument is the astonishing drop in interest rates over the past few weeks. They were historically very low even a year ago, but at the time of writing the 10-year rate was only 0.76 percent. That’s below the rates on Japanese debt during the Lost Decade:
* https://www.nytimes.com/2020/03/07/opinion/the-case-for-perm...
Borrowing is cheap, so if the US is going to run deficits anyway, instead of 'tax cuts for the rich', there's a lot of infrastructure that's aging that could be rebuilt.
Savers deserve nothing special. Nobody is owed a safe investment vehicle with a positive return. If the market dictates that you have to pay people to take your money and hold it for you, then that's how it should work.
I mean, it's like if you have a bananna stand, and the gov prints billions of dollars to buy banannas on the open market, and now you have to sell your bananas for 5c a piece.
At full employment -- which we were at up until a week ago -- the only thing flooding the market with money can do is cause inflation. We didn't have an inflation, and interest rates were still incredibly low.
Hopefully people have insurance to protect against some of this, but a restaurant owner that didn't plan for their community being shut down by a pandemic within a couple weeks of the first cases in town hitting the news wasn't being reckless
In my very limited understanding the price of stocks were way to high already. The virus is just the proverbial drop, it is not the cause.
And demand shock isn't the extent of it. How many companies could reasonably have been expected to anticipate that their employees will have to work from home? Remote work isn't an option for everyone (good luck remoting into a wetlab), and some companies have built cultures that thrive on people coming into work to meet employees face to face, find opportunities for teamwork and innovation etc. This is a fundamental set of behavior changes, not just a simple demand shock.
And yet, millions of Americans sacrificed, liquidated their businesses or shifted them to a war materiel production footing, changed jobs, bought war bonds, etc. Tens of thousands of diners and clothiers closed their doors in 1942, and Americans were largely happy to do it for the greater good.
This is precisely the opposite of what is occurring now - demands of bailouts, monetization, handouts, 50+ person St. Patrick's Day parties still going, bitching about having to learn how to cook, etc. A complete and total unwillingness to accept even a modicum of pain or sacrifice.
And America didn't even want to join until we were attacked first, even with the threat the nazis posed.
This was all happening in the middle of the new deal, one of the most significant, major government bailouts in all of american history, fundementally defining america as a welfare state.
And what do you call the huge amount of sacrifice by employers taking lowered productivity by sending workers to be remote? Companies that have declared they'll continue paying workers even if business gets shut down? What do you call the enormous social effort to get people to understand social distancing and flattening the curve? Did the populace even know what those terms were a couple weeks ago? What about the thousands of students packing up and going home, evacuating campus while their graduation ceremonies that they've been looking forward to for 4 years are cancelled? And do you seriously think that in all of america during world war two, nobody was a bad person that didn't accept pain or sacrifice, or even actively make things worse? What about jsut a few years before int he spanish flu when government stupidity led to the streets of philadelphia being filled with corpses because people didn't want to call off a parade? What about all the nazi sympathizers and eugenecists in the US that supported hitler? If your bar for "society is just and moral" is that literally no idiots hold a saint patricks day parade out of 360 million people, we've never been at that bar. The only constant through history has been people with superiority complexes on the side moralizing about how people used to be so much more moral (just like themselves of course) in the good old days, and how much society has decayed today.
Businesses shifted to materiel production because they were told the have to, no?
So it seems fair that people are demanding leadership now too, no?
That's definitely one perspective.
How long can you sustain yourself after sudden and sustained loss of income?
One issue with a bunch of broke and homeless people is that a fair portion of them tend to be young males, who tend to have a bit of a penchant for violence.
How long do you think you can defend your hoard of cash and food against looters?
It's time to let everyone reckless go bankrupt, and idiots who "could not see this coming" lose their money and jobs.
The business etc. will go bankrupt, restructured and purchased by people who know how to preserve the capital.
The reason why this keeps happening is because of moral hazard. We keep rescuing reckless behavior at all levels of society. Until there's no way to rescue anything, or the rescue package is going to kill the dollar due to its size.