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  • I look back at things we were putting out

  • and I personally was saying and doing

  • in mid-late February, and I just cringe, it's amazing.

  • In this first episode of the new series

  • I thought we might step back to think

  • about the economics of the coronavirus.

  • How economists have responded to this very different

  • kind of shock to the global economy,

  • and whether the right advice has been getting to governments

  • as they try to cushion the blow.

  • One of the best people I could think of for talking

  • about all that was my old friend Adam Posen,

  • who's been president of the Peterson Institute

  • for International Economics since 2013

  • and also served for a while on the Bank of England's

  • interest rate setting committee.

  • Adam, thanks very much for being with us

  • from your book-lined office.

  • Thank you for having me Stephanie.

  • We're all living in a very different world

  • from a couple of months ago, or even a few weeks ago.

  • How do you think economists have done

  • in first, sort of, assessing this shock

  • and then thinking about how we respond to it?

  • I think economists have displayed

  • both the strengths and the weaknesses of the profession.

  • The strength of being relatively empirical

  • and perhaps to people's surprise having agreement

  • on some basic principles in a policy context

  • is very evident.

  • There is 99% agreement that government had to be involved,

  • it couldn't be just the central banks,

  • and we have to think in terms of essentially

  • setting bridge loans and job preserving programs

  • on an incredible scale.

  • But of course, as you well recognize,

  • I view to my shame, cringing, if you look back

  • to what economists were talking about, including myself,

  • in early February, mid-February, you know,

  • we were not seeing this coming.

  • Our ability to forecast, and our ability to think about

  • what kinds of shocks are happening,

  • when, remains very limited.

  • And one of the big bits of advice,

  • I guess that's particularly, you could see it,

  • particularly in the European governments'

  • efforts is this effort to, if you like,

  • to hold the economy in suspended animation, you know,

  • everything that, the sort of bottom has fallen

  • out of demand, and obviously a lot of businesses

  • feeling that they will go under very quickly

  • seeing the kind of fall in, the kind of fall in revenues

  • that you don't get even in a really deep recession.

  • You're talking about 90% or 100% in some cases,

  • rather than even the worst kind of recession,

  • which might see 20 or 30% fall in demand.

  • But the economists have basically said,

  • Now, what you have to do is, do what you can

  • to fill that hole that's been blown into the economy

  • so that the economy is then intact

  • when you come out the other side.

  • Do you think we, I mean, we can, we know what we should be

  • trying to do in principle, do you think in practice,

  • we're gonna be able to do that?

  • I think you've hit the profound insight, Stephanie,

  • which is that even more than a usual recession,

  • this is something where there's abrupt, sudden stop,

  • and who falls apart in terms of businesses and jobs

  • depends entirely on cash flow at that moment.

  • It's not about, sort of, merit, did you have a good product?

  • Did you invest?

  • Did you save enough?

  • It's really just the size of economic death

  • is do you have the cash right now,

  • or do you happen to be in the wrong industry

  • or the wrong place?

  • And so, the response that we've put together,

  • and I should say we, but I mean the communities put together

  • is really one about providing essentially

  • a bridge loan for everybody.

  • It's the goal to say don't foreclose on mortgages,

  • don't foreclose on loans, don't put people off of jobs

  • if you can hold on to them or if we, the government,

  • we, the public, funds you to keep those jobs,

  • because there is this reality that once something

  • goes under, if it's a company, if it's a job place,

  • and people leave, that it's very hard to rebuild.

  • Some people have said that we may see a reset

  • in our approach to government and our, what kind of role

  • the government should have.

  • Maybe it should be offering, always having and offering

  • more of a safety net to people in the gig economy,

  • for example.

  • Will this different attitude towards government change,

  • do you think, even in somewhere like the U.S.?

  • I think it will, I think there'll be pressure

  • in that direction, and I'm hopeful.

  • But I also think this is gonna be much more contentious.

  • I think that there will be, and I'm already talking

  • to people who say, again, not completely unreasonably,

  • Well, we don't want to communize the system.

  • We don't want permanent ownership of government

  • of all the main industries

  • but I certainly believe the U.S. has a real opportunity

  • and a real reason now to move towards more safety net,

  • as you say, for its workers, for its people.

  • And I think also what's become very clear

  • with the changes in the unemployment regime

  • in the U.S. is that we do have a lot to learn from Europe,

  • that you need to make it so that jobs are not as fragile,

  • as low connection, as you mentioned, gig workers,

  • informal sector, part time people, but also

  • even full time people in the U.S. tend to have

  • much more tenuous support and connection to their jobs

  • at the lower end of the income scale.

  • That should change.

  • Adam Posen, thank you very much.

  • Thanks for having me.

I look back at things we were putting out

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How Covid-19 Broke the Global Economy

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    林宜悉 posted on 2020/04/15
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