At a time the #USCongress is vigorously debating another #fiscal rescue package to support households and businesses into year end, it’s vital to think hard about the intersection between #Fed monetary policy/fiscal support and what it means for #markets: bit.ly/3fkZbfM
In fact, the #CovidCrisis forced an evolution in policy coordination, whereby for the first time since WWII, U.S. policymakers married monetary and fiscal policy, with the #Fed and @USTreasury working together to inject cash from the #Fed’s #QE programs into the private sector…
That has been game changing for #liquidity near-term and should continue to help combat the #economic fallout from the #pandemic.
However, longer-term, we must imagine what a sustainable #liquidity equilibrium under this new #policy regime might look like – where policy liquidity is judiciously provisioned to the real #economy in ways that facilitate #investment and growth.
Moreover, it’s absolutely vital that not only #capital #markets, but also the #banking system remain strong, as a #capitalist #economy is only as strong as its financing systems.
In this regard the developed world has taken divergent paths over the last decade: U.S. and #European #banks formed their #GFC bottom in March 2009, but since then the S&P 500 #Financials Index quadrupled in value, while the Euro Stoxx Banks Index dropped another 25%!
That’s a truly remarkable feat when one recalls the palpable #panic in 2009: how can a #banking system that is ascribed less value by the #market today than in the GFC be expected to provide the #financing needed to restore an #economy’s output?
Share this Scrolly Tale with your friends.
A Scrolly Tale is a new way to read Twitter threads with a more visually immersive experience.
Discover more beautiful Scrolly Tales like this.