Greg Ip Profile picture
6 Feb, 4 tweets, 2 min read
1/ @AngelUbide @Austan_Goolsbee It's because this is not a standard recession that "stimulus" debate is miscalibrated. The GDP shortfall today is overwhelmingly caused not by lack of demand but supply constraints: people who can't/won't work/consume because of the virus ...
2/ ... so fiscal focus must be first, getting the virus under control, here & abroad. You really can't spend too much there: if we fail at this, GDP never recovers, no matter how many checks we write ....
3/ second, relief for those who have lost income because of virus, both for pure welfare reasons & to sustain demand. Enhanced UI, other targeted relief, does that. With virus suppressed demand recovers endogenously: recall Goldman, Morgan see 7% GDP with just $1T stimulus ...
4/ downside risk: the virus isn't suppressed, more relief needed. Solution: triggers! upside risk to current path: economy overheats, r & r* rise faster than expected, fiscal constraints loom, urgent investments are not made /endit

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More from @greg_ip

22 Jan
1/ China beat the U.S. in 2020 because its authoritarian, centralized system better met the challenge of Covid and economic conflict than the U.S.' pluralistic, decentralized system. Will China keep winning? A thread ...…
2/ In 2019 experts ranked U.S. #1 in pandemic preparedness, China #51. Covid outcomes were roughly the exact opposite. China mobilized resources and subordinated individual to collective rights in ways the U.S. could not, or would not ...
3/ On the tech front, official China & private cos redoubled efforts to develop a domestic semiconductor base while in U.S. Cisco rebuffed plea to compete with Huawei & Intel moved to outsource chipmaking ...
Read 7 tweets
20 Jan
1/ The S&P rose 14% between election day and inauguration, the strongest transition rally on record (H/T @WSJ market data group). It rose 6% during Trump's transition, which leads me to reconsider ...
2/ .. importance of taxes (& regulation) in market returns. A lot of Trump rally, I thought, was due to lower expected corporate rate. Now, corporate rate is expected to be flat to higher (since D's won the GA senate) but market up even more ... so this is risk-on and ...
3/ shows that macro outlook (rates + fiscal + growth & of course, vaccines) is way more important than micro outlook for rates, regulation. (S&P transition return below)
Read 5 tweets
20 Dec 20
1/ Sen. @SenToomey's office wanted to curb Fed emergency lending to “preserve Fed independence and prevent Democrats from hijacking these programs for political and social policy purposes.” Yet Toomey also voted to confirm Judy Shelton to the Fed ...…
2/ ... who called for Fed monetary policy to support Trump's tax, trade and regulatory agenda, & has down played Fed's independence, saying Fed should "pursue a more coordinated relationship with both Congress and the president."… ...
3/ Toomey has been consistent on some issues e.g. opposing Trump on trade, but on Fed, he seems much less worried about central bank independence under a Republican than a Democratic president.
Read 4 tweets
24 Aug 20
1/ Lockdowns were a blunt & indiscriminate tool that slowed infections, but with no clear strategy for what came afterwards. We know enough now about how to bring down infections at a much lower cost to the economy. My latest.
2/ We had never used lockdowns before, not even during the 1918 flu. Pre-Covid, they were seen as too draconian and difficult to enforce and thus weren't part of the epidemiological toolkit.
3/ The U.S. missed its chance to emulate HK, Taiwan & SK using testing, tracing & quarantine to stop the pandemic without Covid. But nor did it make a clear choice between simply flattening the curve and allowing infections to continue, as Sweden did ....
Read 9 tweets
23 Apr 20
1/5: Should we worry about the debt? With $484B more stimulus, deficit will hit a post-war high & debt by 2022 will match post-war record. McConnell frets. Should he? My column answers:… Thanks to @budgethawks for figures and @asincopado for charts.
2/5: Long-and short-term interest rates have plunged to between 0% and 1% since pandemic began, and will likely stay low for years more. (Thanks to @csm_research for rate forecast). That completely offsets effect of higher debt on debt service. Ergo, sustainability unaffected.
3/5: I’m not saying this much debt is necessary or being used optimally; that's a topic for a different column. But debt does harm by crowding out private investment and that hasn’t been happening for years, and looks unlikely for years more.
Read 5 tweets
3 Mar 20
1/ One of the consequences of a president who judges all policy actions by the stock market is a tendency of everyone to judge the efficacy of policies by whether they help the market. This is a "looking in the mirror" problem.
2/ The market, like the public, is looking to policy makers to, first, deal rationally and effectively with the virus. That means listening to the scientists, doctors and epidemiologists. Second, the market and the public expect policy makers to mitigate the economic spillovers..
3/ ... as best they can with the tools they have. What should policy makers' response to the market be? Something like: once we have done our job of protecting Americans' physical and economic safety and security, the market will take care of itself.
Read 5 tweets

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