In an interview with Bloomberg News this weekend, President James Bullard of the Federal Reserve Bank of St. Louis made some of the most dire predictions yet about the fate of the economy in the wake of the coronavirus epidemic. Bullard is sounding the alarm over the impact a national market shutdown could have on the workforce in particular, arguing that the U.S. unemployment rate could soar to 30% with an accompanying (and astounding) 50% drop in the gross domestic product.
Insisting that both the Fed and Congress must act with urgency, Bullard said that it could require unprecedented steps to make sure the economy can roar back to life once all of this is over.
“Everything is on the table,” Bullard said. “There is more that we can do if necessary. There is probably much more in the months ahead depending on where Congress wants to go.”
The U.S. central bank has already taken dramatic action, no doubt with a wary eye turned to the plunging stock market. Last week, Federal Reserve Chairman Jerome Powell authorized the renewal of several programs put on hold after the 2008 financial crisis and he slashed interest rates to near zero while buying up Treasuries and mortgage securities.
“This is a planned, organized partial shutdown of the U.S. economy in the second quarter,” Bullard said. “The overall goal is to keep everyone, households and businesses, whole. It is a huge shock and we are trying to cope with it and keep it under control.”
There will be a lot of griping over the coming weeks, of course, as Americans watch as some of the biggest industries in the country get another bailout from the taxpayers. Some of this griping will be understandable, seeing as how we literally just went through this twelve years ago. And it is frustrating, of course, to see companies like the airlines get bailed out after squandering their rainy-day money on stock buybacks for years. Nonetheless, the simple question is: Would we be better off letting them fail?
“It is totally stupid to lose a major industry because of a virus,” Bullard said. “Why would you want to do that?”
Well, exactly. It’s annoying, but it’s necessary.
But we know that Big Industry is going to come out of this thing okay, because Washington isn’t going to let these major companies fail. What we’re really concerned about are the millions of small business owners, because it won’t be possible to save them all – even if there were a concerted effort to do so. Here’s hoping that D.C. and the Fed keep those people (and the workers and families who depend on them) in mind as they move forward with economic stimulus programs.