Policy Response: Fed and Treasury Activism

David and Helen talk to Adam Tooze about what we know about the crisis that we didn't know a month ago, and what we still don't have much of a clue about. From fights inside the French government to the fate of the planet, from shale gas to corona bonds, we try to join up the dots. Plus a small update recorded after news of the oil price-drop. Read 'Shockwave' by Adam Tooze in the LRB https://www.lrb.co.uk/the-paper/v42/n08/adam-tooze/shockwave.

Talking Points:

The dominant reality is the scale of the unemployment rate, especially in the U.S.

• Michigan’s unemployment rate soared to 25% in a single month.
• We have often seen an extraordinary policy response. 

The Fed’s initial policy response was a failure: they didn’t stabilize share and bond markets. But it has now, at least in part, succeeded.

• It also seems to have stabilized dollar funding markets.
• The Fed did in about 3 days what took roughly a year in ‘07/’08.
• Will these actions make democratic politics more difficult in the medium term?

The Fed’s ability to act in certain ways has depended on congressional cooperation. 

• This could change if Biden were elected. Trump’s presidency enables the GOP to behave more pragmatically.
• The shale industry is being bailed out—this is a tricky issue for the Democratic party.

Is data the new oil?

• The tensions between Russia and Saudi crashed into the virus. 
• It’s hard to see how oil prices will recover any time soon.
• Are we entering the oil endgame? If so, seizing market share immediately is much more important.  
• The oil and the financial elements of this crisis are closely connected.

Has anyone moved the dial on corona bonds?

• The Germans didn’t want the question to be put, but the French went ahead and did it.
• But Macron’s recent interview with the Financial Times was vague. How serious are they?
• How does the Eurozone engage in common borrowing without engaging in common taxation?

Mentioned in this Episode:

• Our last episode with Adam
• David and Helen talking to Nate Silver
• Adam’s piece for the LRB on COVID and the global economy 
• Macron’s interview with the Financial Times… on YouTube
• The transcript of Macron’s FT interview

Further Learning: 

• 538 on American unemployment numbers
• More on ‘coronabonds’

And as ever, recommended reading curated by our friends at the LRB can be found here: lrb.co.uk/talking

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