A bit more on Mnuchin's sabotage effort; it's helpful to know the context in which that money was made available in the first place 1/ nytimes.com/2020/11/19/bus…
One of the great fears when the scope of the pandemic became apparent was that it would metastasize into a financial crisis too — and in fact it started to, with 2008-type surges in yield spreads 2/
Fed intervention, and even more important, the promise of more intervention if needed, calmed the markets. But it could happen again — after all, we seem headed for a virus outbreak worse than in the spring 3/
So it makes no sense to yank away the financial safety net — unless you're trying to set up the next president for disaster 4/

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More from @paulkrugman

21 Nov
A wonkish thread on how destructive Mnuchin's decision to terminate emergency lending programs could be, even though those programs have been lightly used so far. 1/ nytimes.com/2020/11/20/opi…
When I think about these programs, my main analogy is the eurozone crisis of 2011-13 — a crisis that was resolved by a promise to lend if necessary, even though no actual lending took place 2/
At the time, borrowing costs for southern European nations were soaring, and default seemed imminent. But the Belgian economist Paul De Grauwe argued that solvency wasn't really the issue 3/ voxeu.org/article/managi…
Read 12 tweets
20 Nov
Mnuchin is effectively trying to create a financial crisis, or at least make one more likely 1/ nytimes.com/2020/11/19/bus…
Emergency lending programs can have a stabilizing effect even when they don't end up being used. Classic example: the euro crisis subsided when Mario Draghi promised to do "whatever it takes" 2/
Even though the ECB never did end up buying government bonds 3/
Read 4 tweets
18 Nov
The next few months will be terrible, politically and economically, and a lot of people will be impoverished and die unnecessarily. But vaccination is coming — and when it does, I suspect we'll recover much faster than people expect 1/
Recovery from the financial crisis was slow and grudging, and many expect the same to be true this time 2/
But that isn't always the case after a severe recession. Pre-1990, recoveries tended to be rapid and V-shaped 3/
Read 8 tweets
15 Nov
Agreed. I've been arguing since the spring that the Covid slump is more like the 79-82 slump, brought on by high interest rates, than 2007-9, brought on (to oversimplify) by an overhang of household debt 1/ cnn.com/2020/11/15/pol…
Once the pandemic abates, which a vaccine will probably achieve, we will be well poised for a rapid, V-shaped recovery. There's a pretty good chance that Biden will preside over a "morning in America" economy 2/
This won't mean that things are OK. Investment demand will still be weak unless we ramp up public investment. Climate change is still looming over everything. But Biden's second year in office may look far better than most people imagine 3/
Read 4 tweets
15 Nov
Gavyn Davies points out that the failure of many nations to deal effectively with the coronavirus bodes ill for our ability to prevent climate catastrophe — but he understates the case 1/ ft.com/content/794eda…
Many people, myself included, have argued that climate is a peculiarly hard issue to deal with, because the consequences of bad behavior, while immense, are diffuse and delayed 2/
For example, failing to properly cap a disused gas well contributes to the destructiveness of tropical storms a decade later and half the world away. Hard to get people to focus on that unless they believe in science 3/
Read 6 tweets
10 Nov
Some thoughts about the vaccine, and it *doesn't* imply.

Pfizer says it might be available for widespread distribution by 3rd quarter. That's great. But it's also 8 months away 1/
Meanwhile, new cases have grown 3% *per day* over the past month. If they continued growing at that pace for 8 months, they'd be up by a factor of 1000.

Obv that won't happen — we'd all be infected long before. But the point is that the vaccine won't control the current surge 2/
For now we need mitigation measures to avoid mass casualties — and economic relief to get people through a very dark pandemic winter 3/
Read 4 tweets

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