Me too. I would take that deal again.

As I recall, for a few weeks in early-to-mid 2020, the world was in the grip of fear, consumers everywhere had drastically cut their spending, and businesses everywhere were in free fall. Government intervention stopped the free fall. I know of several small and midsize businesses that briefly considered Chapter 11 and of one billionaire who had his lawyers draft personal bankruptcy filings during those few weeks. Every CEO and business founder I know took out a PPP loan -- and no one repaid it. The moment government money started flowing, everyone changed their tune. I'm 100% sure that, had it not been for all that government intervention (fiscal and monetary), we would be in the throes of a horrific Great Depression right now.

That said, I think there will likely be two significant costs to all the "mopping up" to be done by central banks (stopping their purchases of government bonds to replace holdings that mature, reducing the pool of capital available for buying government bonds, and raising rates): (1) asset prices are likely to decline, perhaps significantly (that is what has happened in other periods of voluntary/involuntary monetary tightening throughout history), and (2) we will likely have to suffer through a normal recession -- much better than a Great Depression, but still, not fun.

[citation needed]: please distinguish between gifts and loans, bearing in mind that a loan written off other than in bankruptcy can be counted as a gift.

There is a big problem that most of the consumer spending goes through Jeff Bezos who gets to keep a percentage of it, but that's not the same as directly giving him money, and happens regardless of the stimulus or not.

World's leading country in inflation, Venezuela, has terrible wages.

Inflation makes people overworked, by forcing them so sell under fair price. Wages are sticky, prices are not.

That salaries are picking up doesn't mean real salaries have improved. They have not.

The Fed handled the monetary side of the pandemic reasonably well. Inflation overshot a bit, yes. But it's far cry compared to when they caused a slowdown in the housing market to become the Great Recession in 2008-ish.

People with savings and salaries got a nice 7% wealth tax this year

The government, with it's massive 20 trillion dollar debt, got a nice 7% write down on the debt, so they can quickly spend this voucher again in a matter of weeks.

Venezuela (and almost all the classic hyperinflation cases) are forex crises. You can't print foreign currency, which you need to buy goods on the international market; and the collapse by mismanagement of Venuela's oil industry and any other export industries means that the currency is just going to keep devaluing as the trade fails to balance.

> That salaries are picking up doesn't mean real salaries have improved.

It is however a necessary condition for real salaries to improve that nominal salaries improve. Which needs a tight labour market.

This is the big point I think the title article is missing. And I think its going to take some time for the bubble to pop, they tend to be self-sustaining, but it may shift its focus off of Peloton and the winners early in the pandemic. I wouldn't bet against TSLA right now.

There's likely to be another boom later this year as Omicron goes away (even if we get another wave later) driven by positive emotions. Right now all the animal spirits are maximally negative and they're pretty poised for a reversal.

The Fed also won't act sharply enough to spike unemployment this year.

I am not sure why everyone thinks it is cruel and unusual punishment to ask people to do some of those things that need done (burying power lines in cities, as one example) in exchange for money.

Why is it so barbaric to give people a job? Theoretically, there are plenty of low-skilled workers that could've been trained to do needed skilled work during this time - instead of waiting 3 months for low-skilled labor demand to pick back up.

Now - for the rest of their lives - they could be high skilled laborers. Instead, we paid people to just wait.

I agree that it was better than doing nothing.

I suppose it could have been the 1037th Non-Combat Plumber Division and everyone would have been fine with that.

Militaries in other countries are evolving to do more public works and less defense / offense.

A lot of the infrastructure to facilitate it (the hiring, training, coordination, etc) is there.

Or that the Manhattan Project was only good for New Mexico and Washington.

It'll cost ~$21Bn total with financing - but that goes until 2038: https://www.google.com/amp/s/www.boston.com/uncategorized/no...

That comes out to ~$500M a year - which sounds absurd - but that pretty massively benefits ~500k+ people per year. That's ~$1000 per person per year - which still sounds absurd - until you factor in that half of that will be paid in $0.5 and a quarter of that might be paid in $0.25 or less.

And then when you factor in that that monstrous highway is gone forever, and Boston will likely be around much longer than another ~20 years - it honestly doesn't sound like a bad deal.

NYC's second avenue subway - at ~$3Bn per stop - if each stop increases ridership by ~30k people - which generates ~$48M per year in revenue, which is theoretically ~30% less than the ongoing maintenance cost (https://media4.manhattan-institute.org/sites/default/files/f...) - is pretty similar.

IIUC - currently MTA runs at loss of about $7 per month per resident. That seems like an absolute bargain even for people who don't take the train. The reduction in traffic and cars should be worth way more than that to most people in NYC.

What makes you think that temporary measures will avoid a permanent impact on the economy ? These measures only delayed the impact.

As soon as the restrictions were lifted, companies started hiring again

It was never ever ever a demand problem, only of supply.

Unfortunately, people are too ideological and blind to diagnose issues correctly.

People kept receiving salaries, and unemployment benefits. So financial position and income of families was always strong

There's no precautionary savings cycle.. People engaged in financial risk taking by buying houses like never before

I'm confused; weren't you arguing above that unemployment concerns shouldn't have motivated government spending because the drop in demand was artificial? You can't bolster that position by saying that the demand stayed strong because of unemployment benefits and salaries that went out despite people staying home; those spending categories (PPP loans and enhanced unemployment benefits) were a government subsidy to keep demand from cratering.

The personal savings rate tripled in early 2020: https://fred.stlouisfed.org/series/PSAVERT

Fiscal tightening doesn't do anything about inflation. See eg the fiscal cliff of 2013 for an example.

There was hardy any useful stimulus in the US post-2008 because Obama (D) was in the Whitehouse and the GOP-controlled Congress didn't want to help him out. So it was mostly just monetary policy (Fed) that did things, and it was a long slog of pain to get unemployment down and get the economy going.

With COVID we had monetary policy (as before) but also fiscal policy (Treasury), and I think that fewer people suffered economically. Especially since the Fed can only work 'internal' to the financial system, but it takes the Treasury to get cheques-in-hands.

(Certainly the two scenarios are not directly compatible, but it seems obvious to me that fiscal can have more direct impact on regular people's lives, e.g., average savings rate increased.)

For the 2020 recession, you had the Fed drop reserve requirements for bank, and move to average inflation targeting, and in general move much more aggressively.

See also Japan: since the 1990s they had a long history of fiscal stimulus and monetary tightness. When Abe came to power a few years ago, he loosened monetary policy, and the Japanese nominal GDP started to grow again.

specially when the central bank has the tendency to print money to buy government debt, so public solvency is never an issue

You can't really reverse fiscal stimulus. Once you paid people to dig holes and cover them again, you can't really get that money back.

Yes, public solvency is not an issue for governments that borrow in their own currency. But that's a separate concern.

That doesn't matter though? If someone's unemployed, their labor is wasted, and you can't get it back. The money spent is not destroyed, it re-enters the economy when the workers you gave it to immediately spend it, and comes back to the government when they pay income or sales tax.

You can reverse fiscal stimulus by putting up taxes.

Be careful to keep the nominal and the real separate.

Destroying money is great! The Fed can just print more to make up the difference.

Equivalently buying stuff from China, and China hoarding the money they got forever is great, too. You got stuff, and the Chinese only got some database entries.

> If someone's unemployed, their labor is wasted, and you can't get it back.

Yes. (Though the leisure they enjoy isn't necessarily completely worthless. But let's ignore that for now.)

And we find that in general the private sector makes more productive use of people's labour (in real terms). Especially when compared not to the day-to-day running of existing civil servants, but to make-work schemes.

The Fed 'printing' money increases private sector spending and private sector employment.

> You can reverse fiscal stimulus by putting up taxes.

Taxes don't remove the money from the hands of the people you paid to dig the holes and cover them up again.

More importantly: taxes have substantial deadweight losses. Taxes cause real productivity losses.

(Just to be clear: I'm all in favour of financing the government from taxes that have low or zero deadweight losses, like property taxes or land value taxes.)

Selling assets from the central bank balance sheet on the open market has no deadweight losses.

You can do that.... but watch the markets tumble and the interest rates skyrocket... and the politicians and bankers panic!