The world has never seen anything like the current fiscal and monetary response to the coronavirus epidemic, says Gavyn Davies of the Financial Times, and the U.S. taking some of the most aggressive steps so far in its effort to keep the economy afloat. “The increase in fiscal spending and loans in the US this year alone will reach more than 10 per cent of gross domestic product,” Davies writes, “larger than the rise in the federal deficit through 2008 and 2009.”
Low interest rates mean the relief and stimulus efforts will likely be affordable, as long as the Federal Reserve absorbs the increased debt. “It is likely, given present economic conditions, that part of the rise in public debt ends up on central bank balance sheets for a very long time,” Davies says.
