The Stimulus: Too Little, Too Late--But Still A Good Start

The much awaited stimulus package finally passed Congress and was signed into law by Trump yesterday.  While it is a good start, it is far too little and far too late to prevent a coronavirus recession, let alone recover from it--but it may just be enough to prevent or delay it from turning into a full-blown depression.  Hopefully, at least.

First, the FERAL Reserve fired their "bazooka" and cut interest rates to 1% and then to zero, restarted QE, and even cut the reserve requirement to zero as well.  The stock market still crashed.  Then they pledged unlimited cash assistance (via bond and asset buying) to any banks who may need it, a sort of QE on steroids or "UBI for the rich".  The stock market continued to tank, though ultimately seemed to reach an (interim) bottom after declining about a third from its mid-February all-time high.  Then Congress belatedly realized the need for fiscal stimulus, as the FERAL Reserve's measures really only shore up Wall Street and generally fail to "trickle down" to Main Street.  And now the FERAL Reserve is essentially out of ammo in terms of monetary policy.

The CARES Act, the third and most notable of the three coronavirus-related stimulus bills passed so far, among other things bails out businesses big and small, gives relief money to hospitals, expands unemployment benefits, and most famously, gives a one-time $1200 per person to most adults and $500 for children.  The whole package is $2.2 trillion dollars total  While good, this is still unlikely to be sufficient.   Rodger Malcolm Mitchell estimates that we need as much as $7 trillion in newly created dollars to really fix things for good.

What really needs be done are Rodger Malcolm Mitchell's Ten Steps to Prosperity, starting with abolishing FICA, implementing Medicare For All, and implementing Universal Basic Income (UBI), all paid for with new money creation.  We also need a Green New Deal and to improve our public health infrastructure as well.  Also, we at the TSAP believe that we need to pass an Act of Congress adding another, much more effective tool to the Fed's toolbox:  QE For The People, in which the Fed would deposit newly created money directly into the bank accounts of every single American.  This can be done in existing bank accounts, via debit cards, and/or by giving everyone with a Social Security number or ITIN an account at the Federal Reserve.  The latter was actually recommended by an author at The American Conservative of all places, who even described it as similar to UBI, showing that this idea is not just for leftists anymore, but rather transcends the entire political spectrum.  QE For The People will be far more effective than QE for the banks, since it works to stimulate the economy from the bottom up and middle out, not from the top down.

Also, the federal government should use its power of infinite money creation to purchase (at several times the market value) ventilators, masks, PPE, hospital beds, and any other essentials in short supply now, and distribute them for free.  And it would literally cost taxpayers nothing.  And yet, it took a crisis of such massive  proportions to finally and belatedly force the government's hand to even grudgingly give Americans free testing, paid sick leave, and modestly expanded food assistance in the first two stimulus bills.  Now is NOT the time to be cheap!

And lest anyone grouse about the National Debt, keep in mind that our Monetarily Sovereign federal can just print (or more accurately, keystroke) the money.  Yes, really.  That is what it means to be Monetarily Sovereign.  Money is just a simple accounting entry nowadays, so make the entry and be done with it.

Yesterday.

And if Fitch or Moody's or S&P threaten any credit rating downgrades for the USA, let them do what they will.  Then we should #MintTheCoin (i.e. a multi-trillion-dollar platinum coin) and call their bluff.  Problem solved.  Done, done, on to the next one.

It's not only about saving the economy from ruin, but now it's also literally a matter of life and death at this point.  Seriously.  So what are we waiting for?

UPDATE:  As of April, the Federal Reserve apparently has also begun helping Main Street as well as Wall Street, and taking unprecedented steps to do so.  Not quite full QE For The People yet, but hopefully it will eventually pave the way for it.  It's like they finally realized that a fully functioning Wall Street cannot really exist for long without a fully functioning Main Street.  After all, a purely FIRE economy cannot exist without an actual physical economy to back it up.

How To Recession-Proof The Economy

With the coronavirus now officially a pandemic, and the stock market in freefall, recession (if not depression) fears are rapidly mounting.  But what if we were to tell you that not only depressions, but also nearly all recessions, are fully preventable?

Sounds crazy, but keep in mind that before John Maynard Keynes and his groundbreaking economic policies came on the scene, depressions were once a regular occurrence in the USA and globally.  Since 1945, we have not had a single full-blown depression, though we have come very close many times.  And even the Great Recession was a near-depression due to not being Keynesian enough, and implementing unnecessary austerity.  Thus, the next logical step would be to do the same for recessions, and use the power of federal Monetary Sovereignty to prevent them before they start.  Yes, we really can do that.

Almost every recession or depression is fundamentally caused by a shortage of money.  That is a proven historical fact.  So the solution is to make sure the money supply (via federal "deficit" spending as well as monetary policy) grows fast enough to keep up with and allow for a growing economy, and make up for shortfalls caused by any contractions in business activity due to internal or external shocks.

So what to do this time around?  For starters:

• As a stimulus, give everyone at least $1000 cash immediately, no strings attached.  Repeat a few months later if necessary.
• Implement paid sick leave and paid family leave, yesterday.  For ALL workers.
• Provide emergency cash to businesses struggling due to the pandemic.
• Put a moratorium on all evictions and foreclosures during the pandemic.
• Do NOT make any cuts to healthcare, food stamps, unemployment benefits, or any other parts of the social spending budget.  Instead, expand them, yesterday.
• Invest massively in free testing for coronavirus, and in research and development for treatment and a vaccine for this virus.
• Resolve shortages by using federal funds to actively incentivize production of any essentials that are in short supply.

Longer-term, implement Rodger Malcolm Mitchell's Ten Steps to Prosperity, starting with abolishing FICA, implementing Medicare For All, and implementing Universal Basic Income for all.  All of which would be paid for by new federal money creation.  Talk about priming the pump!

We have a choice, so let's make the right one.  Whether it's recession or disease (or both in this case), the old adage certainly applies:  an ounce of prevention is worth at least a pound of cure.