No one knows how long the pandemic will last, how many people will fall ill, how many lives the coronavirus will claim. But the economic and political consequences of the outbreak are already emerging. Measures to contain the pandemic are disrupting public life around the world.
The Economic Response
Unlike the 2008 crisis, however, this time the central banks are not in a position to save the day. To date, interest rates have been at historic lows in all major economies. The US Federal Reserve has therefore started to provide liquidity directly to the markets through repo transactions.The crucial question, however, is whether the Corona crisis can be overcome with monetary policy instruments at all. That very much depends on the nature of the crisis.
Suddenly everything is happening very quickly. Within hours, such large sums are being pumped into the markets that make the “radical” promises of Democratic presidential candidate Senator Bernie Sanders seem like pocket money in comparison. German politicians, who yesterday had gotten heated up by the intellectual musings of young socialist Kevin Kühnert, are now seriously considering the nationalization of corporations. What was dismissed in the climate debate as the naive dreams of children is now a sad reality: global air traffic is coming to a standstill. Borders that were considered unclosable in the refugee crisis are now indeed closed. And along the way, conservative governor of Bavaria, Markus Söder has abandoned the German fetish of balanced budgets, announcing, “We will not be guided by accounting issues, but by what Germany needs.”
The corona crisis amounts to an enormous field test. Millions of people are experimenting with new ways to organise their everyday lives.