A city once lit up by restaurants, music, and endless dancing
View from my balcony — Palermo, Buenos Aires
Today marks my one month in Buenos Aires, a city famous for its lively culture and ubiquitous music. But lately, it’s become a ghost town. Argentina was the first country in Latin America to shut down its economy in response to the coronavirus disease. In a letter to the Argentinian people, President Alberto Fernández mentioned it to be “an exceptional decision for exceptional times.” Forty-five million residents were ordered to stay home, with slight flexibility for those shopping for essential supplies or seeking medical attention.
I arrived in Buenos Aires the day before the government imposed a quarantine for foreigners and a few days before they issued a country-wide lockdown. Before the quarantine, lines for restaurants wrapped around the corner, servers bustled in and out, carrying bottles of Malbec wine and plates of flank steak with chimichurri sauce. The smell of fresh garlic and lightly fried pastries permeated the summer air, luring in anyone who came within its vicinity. Friends greeted each other with pecks on the cheek before entering the local bar. Bright lights hung like Christmas decorations through the neighborhood, lighting up the cobblestone streets where children ran in circles whilst playing their own version of tag.
This world has seemingly vanished.
My quaint, urban balcony overlooks a windy strip of residential buildings at the heart of Palermo, a trendy neighborhood in Buenos Aires. On the balcony a few floors down to my left, I catch a young girl no older than seven pushing her stroller back and forth in the tiny, confined space as if she’s rocking a baby to sleep. On the rooftop a couple blocks down, I glimpse a man lightly jogging before he turns the corner and disappears. Across from his roof is a woman gripping the edge of the glass rail, gazing longingly into the distance. It’s an eerily quiet Saturday afternoon. Police cars patrol the vacant streets, ready to pounce at any behavior that appears abnormal.
For the first 14 days, I was under the close watch of the building security guard; hence, my only glimpse of the outside world was via my balcony. Once, the city police banged on my door at 2 a.m. requesting my passport and signature on a stack of Spanish papers which I could not understand. I assumed it must be something related to not leaving during the quarantine. Apparently, they were going door to door to track down all foreigners in the city.
After two weeks of utter solitude and limited food varieties, I was finally permitted to personally shop for groceries rather than ordering from Rappi or PedidosYa, the local food delivery apps. I donned my mask and gloves, excited to see my neighborhood and take back a large loaf of freshly baked bread.
But the outside world was no different than the view from my balcony. Outdoor dining was replaced by shuttered doors; normally vibrant streets were instead dark, muted, and lifeless. I had imagined my days hidden in hip coffee shops writing delightful screenplays and my evenings filled with folklore music, live tango shows, and glass after glass of the famed Malbecs. I dreamt of weekends on a ferry towards Uruguay, in a winery in Mendoza, and on a bus towards the Andes to Santiago. Instead, I would spend my days discovering which grocery stores offered the best selection of chocolate, a dietary staple for me during these anxious times.
Aside from grocery stores like Disco, Jumbo, and a few local Chinos, I haven’t been able to see anything of Palermo, let alone the broader country. International and domestic travel have become vastly limited. Several times a week, I would receive an email from the U.S. Embassy informing me of limited flights home: “If you need to leave Argentina, you should strongly consider booking this flight, otherwise you should be prepared to remain abroad for an indefinite period.” I refuse to admit to myself that I may leave Argentina without ever having indulged in its culture.
So I remain. The days pass by one by one, and after the third week, they start to blur together. I learned a few lines of Spanish so I can order a coffee-to-go from an elderly man at a local cafe a few streets down. He had blocked his doorway with a wooden table, which was half occupied with packs of sugar, stirring sticks, and coffee lids. “So weird,” he once said to me, with a shaky smile. I could see the agony in his eyes. His business no doubt suffered from the shut down, and he had very few revenue options aside from offering delivery services. Similar to all the other restaurant owners on the street, he wrote out the lunch menu on a large outdoor chalkboard and made delivery flyers readily available for each passerby.
Yesterday, I walked to the local Chinatown to pick up condiments. I’d been craving chili oil and fresh fish, which were nowhere to be found in the local grocery stores. To avoid attracting attention to my Asian features, I put on a beret along with my mask and gloves. I had been reading about racism towards Chinese people running rampant across the world and thought it was well worth taking precautions, especially since I have barely seen any Chinese residents in Buenos Aires.
On my route, I counted only a handful of people outside — it was hard to imagine that I was strolling through one of the largest cities in Latin America. Perhaps one-third of them, usually women or the elderly, wore masks and gloves. They all made sure to maintain a distance of two meters or more. Fruit vendors lounge outside their stand, waiting for a shopper to come by. I caught sight of a few elderly women conversing on separate balconies. It made me wonder whether they did that during normal times. No one dared greet each other with a kiss on the cheek, which was once the norm in this culture. Cars were a rare sight; instead, the streets lined with bikers and motorcyclists delivering supplies, groceries, and food. I passed a metro station, its gates completely shut. A few buses still operated, but most of the ones that drove by were entirely empty.
The city was enclosed in an apocalyptic aura, as if we were all starring in a Black Mirror episode.
I retreat to my balcony, the only place where I can people-watch without feeling the police breathing down my neck. The man has stopped jogging and started a series of squats. I shift my gaze downwards. A lady on the 8th floor of a parallel building has just finished her sunbathe; next door, another woman hangs up her freshly laundered towels to dry. Time passes idly. I hear rave music coming from the right side — a one person party? More people step out on their balconies.
It’s now 9pm. Right on the dot, the silent neighborhood explodes into cheers and applauses thanking the country’s medical staff, who have been working tirelessly day and night. I stand up and join them. This daily expression of gratitude is the only time I feel the city come alive.
As an outsider, I cannot possibly fathom how difficult this lockdown has been on the country and its people, especially since Argentina was already deep in a recession pre-pandemic, but I highly respect President Fernández for shutting down the economy long before other Latin American countries such as Brazil and Mexico, and even before some states in U.S. did. It takes a great deal of resolve, courage, and responsibility to impose such harsh measures during a time of economic distress, a deed neighboring countries initially refused to act on in fear of complete economic collapse. He understood the harrowing risks of uncontrolled infection growth in a vulnerable region where the healthcare system, ventilator supply, and sanitary conditions are in question.
Argentina has set an example for not just the rest of Latin America, but also the U.S., by trusting in science, learning from Italy’s missteps, and acting early. As of April 12, 2020, the World Health Organization reported ~2K cases of coronavirus in Argentina, which is half of Mexico’s ~4K and significantly lower than its neighbor, Brazil, at ~20K.
The lockdown comes at the burden of the population, but in Buenos Aires at least, its citizens are trying, albeit begrudgingly, to abide by the isolation requirements, even if it means temporarily setting aside their cultural norms.
Strange and unprecedented times, indeed.
We must not forget about climate change, the elections, homelessness— just to name a few
April 10, 2020 | Medium
Source: Our World In Data— Apr. 10, 2020 — COVID-19 infections
The infamous virus not only disrupted our physical environment, our emotional well-being, and our global economy, but it has also infiltrated every bit of our digital lives. From social media — Facebook, Twitter, Instagram — to news outlets — New York Times, Wall Street Journal, NPR, national television reporting — information and updates regarding COVID-19 plaster every headline on a regular basis.
The harrowing effects of the pandemic will likely persist for the next few years. We will probably see the rise of new concerns, especially economic woes, in a post-pandemic world that will compete with existing issues on attention, funding, and political will. Ushering life back into normalcy is critical for every country to prioritize, but we must not forget the conversations that were top of mind before the world went into lockdown. These issues will not simply resolve themselves.
1. Donald Trump was impeached by the House of Representatives in December, and he is seeking re-election in 2020
Let us all be reminded of the impeachment drama in 2019 that turned the world’s most powerful nation into a 21st century political sitcom, as our leaders rotate pointing fingers and placing blame on one another. It all started when a whistleblower came forth and alleged that Trump used “the power of his office to solicit interference from a foreign country” in the 2020 presidential election. Soon after, White House Chief of Staff Mick Mulvaney admits the office withheld military aid to Ukraine in order to pressure Kyiv to investigate allegations involving Joe Biden and the 2016 election. Following a slew of investigations, the Democrat majority voted to impeach Trump last December. The Republican majority acquitted him at the start of 2020.
Amid the drama, Trump seem to have emerged even more energized. His post-impeachment purge continues in spite of the dire situation our country is in, recently with the dismissal of Michael Atkinson, the intelligence community’s inspector general who had sent the whistle-blower complaint to Congress. Elections were and are still happening around the globe, even though primaries have been postponed. House Speaker Nancy Pelosi called Trump “an ongoing threat to American democracy,” but given the current circumstances, how likely is it that we will overlook his impeachment and brush off Pelosi’s statement? Will an economic stimulus package and intermittent aid mask his abuse of power? And will citizens openly speak up and show up on Election Day?
2. Investigations into Big Tech were at full force, but now they have skidded to a halt
Antitrust investigations against Alphabet, Facebook, and a handful of other tech giants have been ongoing last year. In November 2019, the Justice Department warned tech companies against their collection of consumer data, which could in turn increase their industry stronghold and harm competition. Small companies have found it harder to compete, and tech giants have no problem swallowing them up. Over the past decade, tech giants were able to escape regulatory oversight to consume a number of smaller companies, and they continue their expansion today (see Google’s acquisition of Fitbit). The investigations were intended to break apart their monopolistic power.
But these investigations have come to halt in light of the COVID-19 pandemic as an effort to not destabilize firms during this volatile time period. Once condemned by policy-makers, the actions of tech giants are now commended. They play an increasingly large role in the pandemic world, as people rely on Amazon for supplies and entertainment, Facebook for social cohesion, and Twitter for CDC guidelines and removal of false information. They are vital to society right now, and will continue to be, but the conversation around aligning our digital and political worlds needs to continue: should regulators absolve them of their monopolistic tendencies due to their help during the pandemic, or resume an aggressive crackdown on their power?
3. Homelessness is still a serious issue in America, and the pandemic has aggravated its consequences
The United States has sustained a severe homeless problem. According to The State of Homelessness in America, over half a million Americans were homeless on January 18, 2018, and just under 200,000 are living on our streets. There are many reasons that contribute to America’s large homeless population — one of them being the overregulation of housing markets, which conservative homeowners advocate (referred to as NIMBYs). The inability to build more homes restricts the supply and increases housing prices. The study estimates that if the top metropolitan areas with significantly supply-constrained housing markets were to deregulate, overall homelessness would decline by 13%. Policies combatting homelessness have been a longstanding debate amongst lawmakers in areas such as the San Francisco Bay.
The homeless have become especially vulnerable during the pandemic, in particular those living on the streets. Some suffer from mental illness, drug addiction and poverty, making them even more susceptible to contracting and spreading the virus. As NGOs pull out of support programs and advise staff members to go home, it becomes increasingly difficult for the homeless to obtain shelter, food, and the right medical care. Furthermore, homeless shelters are either full, closed, or too risky to consider sleeping in due to poor hygiene. The guidelines set by the CDC (stay home, wear masks, social distancing, wash hands) are almost impossible to attain, as unsheltered people don’t have access to toilets and still rely on congregate settings to meet their basic needs. Gavin Newsom, Governor of California estimates around 60,000 homeless people could end up infected with coronavirus. The pandemic exposed the seriousness of the homeless problem, from lack of available shelters to limited hygiene and medical care access. How can our country ensure the safety and well-being of these individuals during and after the pandemic? And will regulation and hygiene guidelines in homeless shelters be adjusted concurrently?
4. America’s prison system requires serious reform and progress is lagging
Today, 2.3 million people are in jail or prison. America’s incarceration rate has increased by 700% since 1970, and today retains a quarter of the world’s prison population, according to the ACLU. Mass incarceration in American reminds us that racism is still very much an issue in our country. People of color, especially African Americans and Latinos, still represent a large proportion of the U.S. prison and jail population. Michelle Alexander’s book, The New Jim Crow, thoroughly explores the history and realities of mass incarceration as a call for racial justice in America. Since then, some progress have been made — the gap between the number of blacks and whites in prison have shrunk and the penalty for drug offenses are reduced. However, there are still long ways to go.
Currently, the overflowing of jails pose a large risk during the pandemic. In March this year, New York’s Legal Aid Society reported that 3.6% of inmates in New York City jails tested positive for COVID-19, about 9x higher than the overall infection rate in the area. Small confined spaces and the constant entering and exiting of inmates put them at amplified risk of contracting and spreading the disease. Hygiene in prison and jails are not guaranteed, and testing is limited within its quarters. Some countries have temporarily released prisoners as a result, but in America, prisoners are demanding protection without much success. Even if prison safety concerns are temporarily resolved during the pandemic, we must not forget that mass incarceration in America is inherently flawed and remains one of our greatest racial struggles. Will the pandemic urge our government to accelerate progress in this area? If not, how can citizens participate in surfacing this systemic issue within communities?
5. Refugees were severely impacted by Trump’s Travel Ban, and policies may be even more stringent post-pandemic
Prior to Trump’s presidency, the United States has historically offered its land to refugees fleeing persecution and war. However, after Trump was elected, he used security concerns and xenophobic attitudes to justify a Travel Ban, which barred people in Iran, Syria, Yemen, Somalia, Sudan and Libya from entering the US for 90 days. Additionally, it also halted refugee resettlement for 120 days and indefinitely banned Syrian refugees from entering the U.S. Refugee arrivals fell to its lowest levels ever. There are talks to expand this travel ban even more.
Even though the whole world is seemingly shut down, we should be reminded that America’s refugee crisis is still an open issue that needs to be addressed (this is in addition to immigration issues that the U.S. faces). The IRC mentions that a new travel ban policy adds nationals from Myanmar, Eritrea, Kyrgyzstan, and Nigeria to the existing list of those barred from applying for immigrant visas, as well as blocking nationals of Sudan and Tanzania from the diversity visa lottery. As central governments horde more power to maintain order during COVID-19, it will not be a surprise if the administration exercised even tougher guidelines for refugees post-pandemic. How can citizens ensure refugees are protected in this world where it is easier to justify the extension of the travel ban with unsubstantiated claims? (for further reading, see the first section of Esther Duflo and Abhijit Banerjee’s new book, Good Economics for Hard Times)
6. The United Kingdom is no longer part of the European Union as of January 31, 2020, but its transition phase is still one big question mark
Brexit has been under operation for years, but beginning of 2020, the UK officially lost its membership to the EU’s political institutions, such as the European Parliament and European Commission. British voters also appear more divergent than ever, as the Labour and Conservative parties went to extremes — the election of December 2019 was a clash between two historically unpopular party leaders: Boris Johnson and Jeremy Corbyn. Johnson’s sweeping victory accelerated Brexit and launched the nation into the transition period until end of 2020, an effort to resolve UK-EU trade agreements, law enforcement, data sharing and security, aviation standards and safety, electricity and gas supplies, and medical regulation — just to name a few.
It appears that these negotiations are temporarily put on hold as officials in Europe frantically divert their attention to supplying hospitals with adequate ventilators and keeping their citizens safe. Furthermore, Boris Johnson, who leads the Brexit march, was just released from the intensive care unit, where he was being treated for COVID-19. He temporarily created a leadership vacuum as Britain had “no codified order of succession for prime minister.” His infection emphasized how relentless and pervasive the virus has become, which opens up more questions: Will transition plans for Brexit, a highly divided initiative, still take place during a time when greater solidarity is needed? As some countries in the EU emerge high in debt, will the UK provide support? How can we protect the EU from breaking apart as the consequences become more dire?
7. The U.S. and Iran were headed into a dangerous territory, and animosity continues to persist
The assassination of Qassem Soleimani by an American Drone shook the geopolitical arena beginning of this year. Trump’s order to kill Soleimani not only brought the U.S. and Iran to the brink of war, but also led to the Iranian missile attack on U.S. troops at two Iraqi bases and the unfortunate mishap where a Ukrainian passenger jet was shot down, killing all passengers onboard. Furthermore, Soleimani’s attack and death on Iraqi soil sparked mass protests in Iraq against US military presence, leading the Iraqi Parliament to ask U.S. to withdraw its troops.
The tension in the Middle East has a long and gruesome history. U.S.-Iranian relationships intensified after Trump withdrew from the Iran nuclear deal and reimposed sanctions. The killing of Soleimani further increased the animosity. Even with a common enemy — the virus — the U.S. and Iran refuse to unite. Iran rejected American aid and the U.S. continued their sanctions despite calls from other countries to provide relief. If a pandemic cannot forge a truce between the two countries, what will it take? How long will the animosity last?
8. Fires in Australia burned ~30 million acres and it’s still spreading
Did you remember that Australia was on fire? It still is, by the way. In the worst-hit state, New South Wales, the fire rampaged across twelve million acres, destroying over 2,000 houses as a result. More than 1,500 firefighters were dispatched to slow its spread. Some states have declared a state of emergency, and military troops, ships, and aircrafts have been involved in the efforts to contain the fire, as the smoke from the fires have vastly affected air quality. The fires have sparked numerous debates and conversations around climate change.
In addition to the fire, Australia must also take action on COVID-19. As of April 8, 2020, it reported a little over 6,000 cases and 45 confirmed deaths. Whether the fires are attributed to climate change is still up for debate, but at the very least, people all around the world were talking about it. And now, climate change seems to be a consideration of the distant future. The pandemic has delayed International Climate Change negotiations and silenced criticism towards the Trump administration for their neglect. Critics are skeptical that the apocalyptic consequences stemming from COVID-19 will incite countries to reevaluate environmental practices, but we can challenge that. How can we leverage the pandemic to educate others on the cataclysmic consequences of a natural disaster and motivate our communities to continue the conversation around climate change?
9. Hong Kong protests reverberated across the world, but it risks losing its momentum
In June, 2019, nearly 2 million people marched on the streets of Hong Kong to protest the extradition bill, which imposed that criminal suspects in HK to be handed over to the mainland china for trial. It soon expanded to four other demands in addition to the withdrawal of the extradition bill. This included the government to stop labeling protesters as “rioters”, drop charges against protesters, conduct an independent inquiry into police behavior, and implement genuine universal suffrage for both the Legislative Council and the Chief Executive. Protests garnered widespread participation, leading to airport shutdowns, police interference, and sharp decline in tourism.
With the onset of COVID-19 and CDC guidelines for social distancing and calls to stay home, the protests have paused. Whether the movement will regain equal momentum following the pandemic is questionable, as successful protests require populist support and participation. Hong Kong is bracing itself for heavy economic costs that will mount after the pandemic, and if its citizens struggle to maintain stability within their state, will they have the mental and physical capacity to continue their fight for democracy? Or will they rely more on mainland to help minimize the economic suffering?
This is all without mentioning the war in Yemen, Muslim concentration camps in Xinjiang, and the ongoing conflict in Kashmir.
The pandemic has disrupted our lives, our businesses, our movements, our society; but, that does not mean we should pause our conversations and active participation towards building a better humanity. It shouldn’t stop each nation from thinking about how to help our neighbors, whether it’s the homeless person across the street or the country over the seas. Solidarity should be advocated over separation, social harmony over xenophobic slang. Nationalism needs to be set aside, egos should be tamed.
We are entering an altered society, and that only makes these discussions more difficult. Countries need to continue talking about these issues, and as citizens, we should too.
Sound monetary policy is as important as political bipartisanship
Mar 31, 2020 | Medium post
Ben Bernanke (Previous Chairman of the Federal Reserve); Credit: CNBC
Recently on March 27th, 2020, the United States overtook China, Italy, and Spain as the country with most COVID-19 cases. Some of us, as Americans, are agonized and fearful of what is next to come. Without doubt, COVID-19 has evolved into an epochal event that will surely stain the memories of billions.
To cushion the economic impact of the pandemic, the Fed has cut short-term policy rate to near zero and is preparing to purchase $700B in Treasury debt and mortgage-backed securities. Though a pandemic is not entirely analogous to the 2008 financial crisis, monetary policy tactics run similar. In a time of uncertainty, it is increasingly important to stabilize financial markets, which affects investor confidence and ultimately households and businesses. Shelter-in-place is enforced throughout the country, and the hope is that the economic pause will be short-lived — once the pandemic passes, normal activity will resume. However, if quarantine measures extend past summer, this could lead to disruptions in production chains and increased bankruptcies for businesses. Read more on whether quarantines can go too far.
“The challenge we face is how to act with sufficient strength and speed to prevent the recession from morphing into a prolonged depression…[and] it is the proper role of the state to deploy its balance sheet to protect citizens and the economy against shocks that the private sector is not responsible for and cannot absorb.” — Mario Draghi, Italian Economist and former President of the European Central Bank
Let’s expand that view into the global sector. America is not the only country susceptible to a recession — many other countries are either already deep in a recession before the onslaught of COVID-19, or most likely entering one now. 2008 has taught us not only how interconnected U.S. financial institutions are, but also how interwoven our economy is with the global world. Because international banks purchase U.S. government and asset-backed securities, subprime mortgages (which led to the crisis) also affected global markets.
Contagion swept through the markets as banks in other countries defaulted on their debts. In 2011, when the U.S. was still trying to emerge from the recession, Greece’s budget deficit reached an all-time high, causing widespread panic of a default. The European Central Bank (ECB) and the International Monetary Fund (IMF) bailed out Greece, in fear that Greece’s default will lead creditors to pull their money from Italy, Spain, and a few other Eurozone countries which had large deficits.
Imagine the impending global recession leading to a panic where financial institutions start pulling their money out of government bonds in countries with a large budget deficit. Rather than a regionalized issue, such as the Eurozone having to decide on whether to bail out one country, it will become a global problem, where many countries will need to work with the IMF to stabilize those that are hit hardest.
In other words, if a parent has 10 kids, and one of them fell into a pool, she could probably save the one child easily. But, if 6 of them fell into the pool, she may need to think about who to save first and how quickly to act before one of them drowns.
“Over 80 countries, mostly of low incomes, have already have requested emergency aid from the International Monetary Fund. — Kristalina Georgieva, IMF Chief.
To avoid a worldwide economic catastrophe, the Fed, as well as other Central Banks, will need to ensure that strong monetary policy is in place to stabilize domestic economies. I went back through Ben Bernanke’s memoir, The Courage to Act: A Memoir of a Crisis and Its Aftermath, and concluded some key lessons from how the 2008 financial crisis was tackled. Bernanke’s autobiographical account of the 2007–2009 financial crisis and the Great Recession adeptly portrays the scene by scene play of our economy as well as the complex decisions the Fed has made to soften the negative impact on Americans. It is a memoir as much as it is a commentary on America’s regulatory structures and shortcomings. In 2009, America emerged wounded from the crisis and recession, though massively cushioned by a number of policies led by the Fed. The Fed’s main job was to use monetary policy to control inflation and interest rates, and consequently decrease unemployment and increase momentum in the economy.
It is currently 2020, and with near certainty if the lockdown were to continue for the foreseeable months, we will be submerged in growing pains of relieving unemployment, fixing a crippling healthcare industry, and revitalizing small businesses. To stabilize our economy and prepare for the impending recession, the government needs to 1) take lessons from history and apply it to our monetary and fiscal policy, 2) uphold financial stability and liquidity within the markets, and 3) look past political party differences and cooperate with the Fed while fully respecting its autonomy.
1. Lessons of history should be continuously applied to today’s economic issues
Bernanke’s deep understanding of historical panics, especially the Great Depression, and macroeconomic situations led him to promote the less popular New Keynesian ideas of government spending and borrowing during the recession, as well as austerity measures during growth stages. This contrasted with Robert Lucas’s New Classical economics approach in the 1970s, which postulated that monetary policy had no effect on the economy and instead increased inflation. The approach rapidly gained popularity within the macroeconomics community and guided many economic decisions that followed.
Though Bernanke’s ideas were unconventional in macroeconomic standards, he nonetheless decisively chose to rely on his own research and understanding of history to instigate three rounds of quantitative easing (QE), where the Fed purchased large quantities of government securities and assets to inject liquidity into the economy. Contrary to Lucas’s model, the results did not overextend inflation, debunking widespread assumptions on QE’s inflationary tendencies.
Whether an economic policy is effective requires application as well as sound theories. One productive way to learn is by analyzing past programs and policies implemented during historical panics, recessions, and inflationary periods. Some policies may need to be reinstated, some may not. But regardless, the Fed should exercise its independent right to launch and evaluate large unconventional ideas based on historical extraction, rather than implement policies based on conventional wisdom.
2. Financial stability is absolutely critical to preserve the stability of the economy
Bernanke’s decision to bail out big banks is to this day quite controversial. However, given the economic downturn proceeding Lehman’s bankruptcy, it is difficult to refute that the interconnectedness of our financial system could very well generate a domino effect on all lending institutions, leading to an abysmal outcome (e.g., bankruptcies of large banks, rise in unemployment, panic runs) accelerated by the housing market crash. The most important element is to maintain liquidity in the markets, facilitating lending to businesses and individuals in need.
Small businesses are hit especially hard with the current economic shutdown, and the Fed should work with the government to ensure businesses are able to compensate borrowers for their expenses or provide necessary support for avoiding defaults. To do so, the Fed should closely monitor creditor actions and the health of financial institutions to avoid panic runs and fire sale of assets. This requires an increase in transparency on its actions, where any bailouts / security purchases are frequently and clearly communicated to the public. Furthermore, the Fed should maintain low interest rates until the economy gains momentum and stabilizes at a reasonable unemployment rate.
3. Solidarity and political bipartisanship can propel rapid progress
Lack of political bipartisanship fuels stagnation (e.g., Peter Diamond’s nomination, government shutdown in 2013) and threatens the Central Bank’s autonomy. As the Chair of the Federal Reserve, you already face a great deal of scrutiny. Not only was Bernanke dealing with the public’s lack of understanding of quantitative easing, the media’s numerous unsubstantiated criticism, and the misrepresented call to “audit the fed” in a case where the Fed is already heavily audited, he was also the brunt of attacks by politicians who lacked expertise on inflationary and asset-purchase consequences. Politicians such as Ron Paul (R) and Bernie Sanders (D) opposed his monetary approach and disrupted the Fed’s ability to promote the aggressive fiscal stimulus it needed ease unemployment growth.
As we fight the pandemic, it is important the nation sees more solidarity among the diverging political parties, the Central Bank, and our government branches in order to quickly pass legislation and continue critical progress to avoid economic chaos. Without solidarity, we will greatly impede our progress to rescue our economy in a timely manner.
The Fed, as well the central banks of numerous countries, have the responsibility of ensuring and easing the flow of credit to banks and businesses. Many of the programs that were developed in 2008 are reemerging. For example, the Commercial Paper Funding Facility (CPFF), which lets the Fed buy commercial paper directly from banks and large corporations to help facilitate lending to small businesses, has been reintroduced in light of the pandemic.
All around the world, the economic reality of the pandemic is settling in, and the need for stabilization mechanisms appears inevitable. The recent $2T stimulus package in the U.S. is a positive boost, but likely we will need more than that. I wouldn’t be surprised if the U.S. passed several fiscal stimulus packages throughout the next year. For many other countries, it is unclear whether their own reserves and domestic resources will be sufficient, and hence, it is important that the U.S. keeps its own economy afloat as to not further drag down the economies of other countries.
Bernanke made clear through his time as Chair of the Federal Reserve that the Fed’s job is not solely to control inflation, but also to stabilize the economy through a range of policies and governance. It is critical that our administration evaluates historical recessions and policies, stabilize our financial institutions, and unite to act with decisiveness rather than ambiguity. Let’s hope we’re much more prepared to combat the impending economic recession than we were to curb the spread of the virus.