Anyone with foresight will tell you frankly that the negative impact of the coronavirus outbreak on the economy may be great, andMonetary policy alone will have little effect on offsetting the impact of the coronavirus.. Co-ordination between government leaders and central bankers is both necessary and difficult to achieve.

What the Fed can offer is slightly cheaper borrowing costs, printing money or buying back financial assets, but these will not help those in need. Those who are in trouble and companies (in addition to good medical support) need financial support to survive a temporary collapse in income.

While the emergence of the coronavirus and the ensuing economic shock are surprising, several things have been obvious for some time:

First of all, it is clear that recessions will one day be caused by one reason or another.

Second, the US economy is heavily in debt.

Third, monetary policy alone is unlikely to provide much stimulus when interest rates are close to zero.

Finally, we are now in a long-term debt cycle and need good co-ordination between fiscal and monetary policymakers to properly deal with the economic downturn. However, there is also an important pointThe huge gap between the rich and the poor and the political gap that we are experiencing now will make this kind of collaboration difficult to achieve.. Looking back at the historical period when this happened, the last time it was in the 1930s, the key to success was the ability to co-ordinate fiscal and monetary policy leaders.

So what needs to be done now?The most important thing is to enable those hardest hit by the virus to be protected through financial policies such as bridge loans and financial assistance.。

Some people will think that providing such assistance is a bad idea. Some people think that our Darwinian economic system is designed to eliminate those with poor financial management, while others think that financial aid will increase the government deficit.

I do not agree with all these arguments.

The crisis is not a test of the economic viability of individuals and companies, and the cost of not providing assistance will be greater than that of providing assistance. Novel coronavirus is a natural disaster, just like a hurricane. If we do not provide financial support to those responsible, these companies and individuals will go bankrupt. Many people live near the poverty line without financial buffers, and their economic situation will be as hard hit by the "coronavirus tsunami" as their health. Similarly, many companies that are actually doing well cannot withstand the economic downturn.

Now, imagine the health and economic impact of the epidemic, and what the consequences will be. Imagine that many companies are suffering severe revenue losses, some of which are already heavily in debt due to continued low-interest loans and other motivations. this crisis will force them to cut wages and default on their debts.

Economic problems can spread like a virus.Providing assistance under such circumstances is not only out of humanitarianism, but also a good economic policy to help those productive individuals and companies, otherwise they will be defeated, leading to a decline in social production as a whole.

The scale of aid should match the degree of crisis.Of course, it will increase the deficit and lead to higher interest rates. This requires the Fed to keep interest rates low by printing money and monetizing debt.. While this fiscal-monetary co-ordination is controversial, it is the best policy at a time when the economy is heavily indebted and other stimulus measures are ineffective. This is also a policy that we all need to adapt to, because in this era of near-zero interest rates, it is the only way for economic policy makers to cope with the economic downturn.

For me, the only remaining question isCan our fragmented political system-led by people who are more likely to fight each other than cooperate-do what needs to be done?？

Conclusion

The outbreak of the epidemic has had a great impact on the global economy, and the liquidity pressure in the United States has doubled in this environment. Looking back over the past week, the spread of the global epidemic and the oil "black swan" have led to a sharp fall in most of the world's equity markets. The decline in US stocks, US debt and gold reflects the liquidity concerns of US financial institutions.

Originally, there was an interest rate meeting on March 18, which the market expected to cut interest rates by 25 to 50 basis points. But the Fed can't wait for those four days, cut interest rates by 100 basis points, far more than the market expected, and has emptied almost all the bullets available in its toolbox, suggesting that the US financial system is at risk of collapse.

Perhaps the Fed sees deeper crises that we have not seen, such as credit markets and liquidity crises, which are so terrible that easing is urgent. The shadow of recession will come, and the world economic crisis will inevitably come thoroughly. To make matters worse, the Fed has run out of bullets, and as things stand, the economic crisis is just beginning.

Mankind is a community with a shared future sharing weal and woe. The COVID-19 epidemic is a common challenge for all mankind, and no individual or country can be left alone. As Dario said earlier this month,The most important assets you need to take care of are you and your family. As for investment, I hope you can anticipate the worst and protect yourself from being affected.