Coronavirus: All Citizens Need an Income Support — Jim O'Neil

Against the background of the previous economic crisis from 2008, and the apparent difficulties that more traditional forms of economic stimulus have faced in trying to help their economies and their people — especially against a background of low wage growth, and actual and perceived rising inequality — other ideas have emerged.

Both modern monetary theory and universal basic income essentially owe their roots to the judgement that conventional economic policies have not been helping.

At the core of these views is the notion of giving money to people, especially lower income people, directly paid for by our central banks printing money. Until recently, I found myself having very little sympathy with these views but, as a result of Covid-19, I have changed my mind.

This crisis is extraordinary in so far as it is both a colossal demand shock and an even bigger colossal supply shock. The crisis epicentre has shifted from China — and perhaps the rest of Asia — to Europe and the United States. We cannot expect policies, however unconventional by modern times, such as the dramatic monetary steps announced by the Federal Reserve Board and others like it, to put a floor under this crisis....

In the US for example, I believe the Federal Reserve is legally constrained from pursuing a direct transfer of cash to individuals or companies, and this may be true elsewhere.

But this is easily surmounted by fiscal authorities issuing a special bond, the proceeds of which could be transferred to individuals and business owners. And central banks could easily finance such bonds.…

Just appropriate the funds already.

Chatham House
Coronavirus: All Citizens Need an Income Support
Jim O'Neil