What It Will Take to Save Economies From the Coronavirus Pandemic

In 1873, Walter Bagehot, a prominent businessman in British high society and a journalist who served for 16 years as editor-in-chief of The Economist, wrote a treatise on banking and finance in which he left his most enduring mark on the world. In “Lombard Street: A Description of the Money Market,” he laid out a playbook for policymakers facing an unfolding economic and financial crisis. When up against such a challenge, Bagehot asserted, leaders must enact a policy response that is both swift and large. “By that policy,” he argued, “they allay the panic; by every other policy they intensify it.”

Economic policymakers around the world today find themselves facing an incredible challenge. As the novel coronavirus spreads, governments are swiftly implementing drastic measures to limit the scope of the pandemic, including banning public gatherings, closing national borders and shuttering all non-essential businesses.

These emergency measures are unquestionably justified, as millions of lives hang in the balance. But they have hit economies with a shocking intensity that seems to get worse by the day. Entire economic sectors have been shuttered and seemingly carved out of society in less than a week. The wrenching effects of these unprecedented events hit hardest at the individual level in the form of wage cuts and job losses.

Viewing the crisis from a higher altitude, however, financial markets are responding to widespread fears about the pandemic’s aggregate economic impact. Global equity markets are volatile. In the United States, stocks have lost three years of gains in less than a month. In Europe and Asia, equity and bond markets have been hammered.

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Πηγή: worldpoliticsreview.com