Monday, June 22, 2020

How Big is the Next Bailout Going to Be And What Will Be the Consequences?

The COVID-19 related bailouts are not stopping.

There are trillions more dollars the Federal Reserve is going to have to print out of thin air.

The Washington Post's Robert Samuelson sets the scene (my highlight):
It can be said without fear of contradiction that the government’s strategy for dealing with the economy’s pandemic collapse is utterly simple: Throw money at the problem. Lots of money. That’s the chief legacy of the Coronavirus Aid, Relief and Economic Security Act, or Cares Act.

Remember, it and other related measures will cost $2.4 trillion over a decade, with more than 90 percent being spent in 2020 and 2021. There were those $1,200 checks for most households (for couples, the phaseout began at income of $150,000). Unemployment insurance was sweetened by adding $600 to weekly payments. The Paycheck Protection Program lent up to $10 million to firms with fewer than 500 employees — loans that were converted into grants if the businesses used the funds to maintain workers’ salaries. State and local governments got $150 billion. Airlines got ­$46 billion.

This was the mother of all bailouts — and it’s not finished yet. The amounts above must be increased by roughly $3 trillion, representing what the Federal Reserve has lent to keep credit flowing, prevent financial panic and stimulate a recovery. Is this the end of it? Nope. What comes next? You guessed it. More bailouts. Conceivably, the next stimulus could be even larger than the last

Note well: There is nearly zero discussion of the price inflation threat looming because of this massive money pump--that's right nearly zero.

The discussion of the importance of conservative fiscal policy, never an important topic in recent times, has now almost completely disappeared.

Keep this in mind, nearly the entire economics community has not shouted out any type of warning about a great inflation wave developing that should be easy to spot.



1 comment:

  1. The unemployment is a serious distortion. While many are getting the $600 extra, hundreds of thousands of people are now going on multiple months without being paid anything at all!

    The result is an extreme distortion and many people are absolutely financially destroyed now.