Chris Dillow: On capitalist stagnation [feedly]

Chris Dillow is a Marxist investment expert, and a successful one. 
An amusing combo, but he is provocative. This is a good post.

On capitalist stagnation
https://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2020/03/on-capitalist-stagnation.html

Chris Dillow

One of the problems with even the best journalism is that it reports day-to-day events without putting them into context, thereby telling us about the weather but not the climate. So it is with the news that ten-year Treasury yields have hit a record low.

Although the latest move is due to increased risk aversion triggered by the coronavirus this merely continues a long-term trend. Nominal yieldshave been trending down since the 80s, and real yields probably since it 90s.

Why? Standard explanations talk of the shortage of safe assets and global savings glut. Useful as they are, such explanations miss something important. This is that basic theory (and common sense) tells us that there should be a link between yields on financial assets and those on real ones, so low yields on bonds should be a sign of low yields on physical capital. 

And they are. My chart shows that the profit rate for US non-financial companies has trended down since the 1950s. I'm not using fancy Marxian calculations here – though they tell a similar story. I'm simply using the Fed's own numbers, expressing pre-tax profits as a percentage of non-financial assets measured at historic cost. Although this profit rate is higher than it was in the crises of 2000-01 and 2008-09, it is much lower now than it was in the 60s and 70s. And profits have never sustainably recovered from the crisis of the 70s and 80s. Even by their own lights, therefore, neoliberal policies – such as lower taxes, sharper CEO incentives, weak unions and a focus on shareholder value - have failed.

You might find this surprising. How can we reconcile it with the fact that, until a few days ago, the stock market was at a record high? Simple. For one thing, listed firms are an unrepresentative sample of all firms. They tend to be bigger and more monopolistic than the average – and the bigger ones among them are more profitable. And for another, the market's high valuations reflect the hope that firms which are not very profitable (or loss-making such as Tesla) today will deliver monopoly profits in future. If we look past a few giant monopolies, the typical American firm has been struggling.

In light of this, three Big Facts make sense.

The first is the slowdown in productivity growth. Having risen by 2.2% per year in the 50 years to 2007, output per worker-hour has grown only one per cent per year in the last ten years. One reason for this (of several) is that lower profits reduce the incentive to invest and innovate. This is especially the case when low profits for many firms co-exist alongside monopoly power for a few, because monopolies prefer to entrench their power rather than innovate. Secular stagnation did not drop from the sky. It's the product of trends within capitalism.

The second is capitalism's vulnerability to crisis. To see this, imagine a different world in which there were abundant big profit opportunities for non-financial firms in the early 00s. The flow of savings from Asia would then have financed these cheaply. We'd thus have seen strong growth in the real capital stock and in productivity and profits (and maybe wages and employment too). But we didn't, because there were few such opportunities. Savings flowed instead into housing and mortgage derivatives thereby stoking up a bubble which led to the crisis.

The third fact is documented by Anne Case and Angus Deaton in their new book, Deaths of Despair, wherein they show that, for middle-aged white people without much education, deaths from suicide, alcohol and drug misuse have soared since the 90s. A big reason for this is that employment opportunities for such people have worsened; even in today's supposedly "tight" labour market, people without degrees are much less likely to be in work than they were in the 90s. And many of those who are in work are in worse jobs. Case and Deaton note that white men without a degree earn less in real terms than they did in 1979. Fewer and worse jobs mean a lower sense of self-worth, stress, family breakdown and hence deaths of despair.

But why have such job opportunities declined? It's easy to blame globalization or technical change. But these are different ways of saying that it is no longer profitable for capitalism to employ less-skilled people at a decent wage.

The drop in bond yields is therefore one of the more innocuous symptoms of a dysfunctional capitalism.

Of course, all these trends have long been discussed by Marxists: a falling rate of profit (pdf); monopoly leading to stagnation; proneness to crisis; and worse living conditions for many people. And there is plenty of evidence (pdf) for them. The problem is, however, that many people want to shut their eyes to this evidence. In this sense, perhaps today's two big stories – the record-low for bond yields and the success of Joe Biden in the Super Tuesday primaries – are related.

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What the Fed can do to help with with coronavirus’s economic aftershock [feedly]

Summers (always worth reading) on the coronavirus impact....

What the Fed can do to help with with coronavirus's economic aftershock

http://larrysummers.com/2020/03/04/what-the-fed-can-do-to-help-with-with-coronaviruss-economic-aftershock/

While the Fed acted preemptively Tuesday, it is still too early to say much that is definitive about the economic threat from coronavirus. We do know, however, that this is one of the most dangerous and disruptive disease outbreaks since World War I.

Science and medicine have of course progressed massively since the 1918 Spanish flu. On the other hand, the world has nearly five times as many people now, and our interconnection is vastly greater, with 2.8 million people flying each day, in the United States alone, inside metal tubes with recirculating atmospheres. Large fractions of the world population live in places with little ability to carry out systematic health policies.

According to the Centers for Disease Control and Prevention, roughly one-third of the world's population was infected with the deadly Spanish flu, and 50 million people died — about 3 percent of global population then and a mortality rate of about 1 in 10. Suppose with novel coronavirus the mortality rate turns out to be 1 percent and the disease reaches 10 percent of the world, so that fatalities amount to not 1 percent but 0.1 percent of the global population. The result would be more than 7 million deaths.

What we have seen so far has already had far-reaching economic effects. International meetings are being canceled. Shipments from Asia to the Port of Los Angeles are likely to be down by 25 percent in February. Financial markets, which are forward-looking, lost $6 trillion over six days before regaining some of the lost ground. It is close to an even chance the U.S. and global economies will go into recession in the next 18 months.

The questions in the current moment properly revolve first and foremost around public-health strategy. But there is much for economic policymakers to consider as well. Unfortunately, the tool that has received the most attention — monetary policy — is not likely to be very effective in a crisis of this kind, and the way it's used could create problems down the road. It may on balance be desirable to cut interest rates — as the Fed voted to do Tuesday ― but the principal focus should be elsewhere.

Common sense offers the most important point. When, as in the 2008 financial crisis, output is dropping because consumers and businesses cannot afford to repay loans or get new ones, lowering interest rates and making more credit available is the natural and appropriate policy response. But when GDP falls because businesses cannot get components necessary to generate output, because quarantines limit people's ability to work and because potential customers are rationally afraid to enter public spaces, then monetary policy is much less useful.

Moreover, this is all happening when the efficacy of monetary policy may already be largely exhausted. With 10-year U.S. rates approaching 1 percent, high uncertainty and limited room for cutting short-term rates, it is far from clear how much monetary moves can encourage economic activity, even without a pandemic.

There are also tactical issues to consider. The hardest moments for economic policymakers are when the power of the tool at their disposal is less than what is generally supposed. In such a circumstance, policy can function better as a potentially potent "sword of Damocles" than it would if its limited efficacy were laid bare. Closely related to this is the idea of never shooting your last bullet. And to the almost inevitable extent that it would appear political, a sharp move to easy money may undercut the Fed's credibility.

Despite all this, Tuesday's rate cut may nonetheless have been the right option, simply to avoid adding disappointment with the central bank to the current challenges. But the benefits of monetary pyrotechnics like Tuesday's in the form of extraordinary timing and size of monetary moves have to be balanced against the alarm they may cause and the way they leave central banks exposed as lacking effective tools.

Much more attention should be devoted to economic policies better targeted at pandemic risk.

First, central banks should develop a facility to assure that credit is not cut off to key sectors of the economy, come what may. Steadily available credit is much more important than lower-priced credit.

Second, as huge excess capacity at major global ports suggests, this is a moment for less — not more — interference with trade flows. Though it may go against the president's instincts, the United States should lead a global effort to reduce tariffs as a source of stimulus for the duration of the health emergency.

Third, planning should begin for fiscal expansion via federal budgetary investments in areas like the purchase of ventilators, videoconferencing equipment and distance-education technologies, all of which are directly connected to the coronavirus problem. And, of course, there is far more risk of spending too little on health research and production of health goods than in spending too much.

Fourth, international financial institutions' failure to move to help the world's poorest countries at a moment when they could suffer an AIDS-level catastrophe is scandalous. The United States should use its influence to assure that the International Monetary Fund, World Bank and regional banks step up on behalf of all nations, for all nations.

Just as the 2008 financial crisis upended the 2008 presidential election, coronavirus may upend this presidential campaign. 2008 was about money and the economy. This will be about money and life and death.

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Five degrees of separation from De Niro – charting the social networks of movie stars [feedly]

Social network analysis is becoming a very powerful tool in economic analysis, but many other domains as well, including politics.

Five degrees of separation from De Niro – charting the social networks of movie stars
https://www.globalpolicyjournal.com/blog/06/03/2020/five-degrees-separation-de-niro-charting-social-networks-movie-stars

Social network analysis is a branch of data science that allows the investigation of how people connect and interact. It can help to reveal patterns in voting preferences, aid the understanding of how ideas spread, and even help to model the spread of diseases. It can also be used to find out who is at the centre of the movie universe.

To give an example, the picture below shows the social network of actors appearing in Christopher Nolan's three Batman movies. Each node in this network corresponds to an individual actor. Connections between actors indicate an appearance in a movie together and different coloured connections represent different movies. The network clearly shows that Christian Bale is very central, having appeared in all three movies and with all other actors. The same is also true of Gary Oldman, Michael Caine and Morgan Freeman. In contrast, the remaining actors are rather peripheral and have fewer connections to others.

The same principles can be used to generate a social network of all actors from all movies. Luckily, the information is available through IMDB, which contains cast lists of around 160,000 different movies. This leads to a large social network of around 400,000 actors and nearly 10 million different connections. From here it is possible to determine the most "important" or "central" actors in this network .

Most connected

One way of measuring importance is to simply count the number of movies that an actor has appeared in.

The top spots are occupied by actors from Indian cinema – with the great Bollywood actress Sukumari winning the competition, having made 703 credited movie appearances. The next actors are then [Jagathy Sreekumar], Adoor Bhasi, Brahmanandam, Manorama, Sankaradi and Prem Nazir, who each appear in more than 500 movies. The only non-Bollywood actor breaking the top 20 is Oliver Hardy, who has 373 films to his name. Then, if your were to look for any of this year's acting Oscar winners, you would have to go all the way down to the bottom to find Brad Pitt, who has made a total of 56 movie appearances.

Another simple statistic from this network is the number of different people that each actor has appeared with. In this case, the top ranked actors again come from the world of Bollywood, with actors such as Nassar, Sukumari and Manorama all having appeared with more than 2,500 people. Other prominent names include Christopher Lee and John Carradine at just over 2,000, and John Wayne on 1,900. In comparison, the highest of this year's Oscar winners is again Brad Pitt on a lowly 735, while Renée Zellweger and Joaquin Phoenix both have disappointing statistics of less than 500.

The middlemen

A trait of the above two measures is that they highlight actors that happen to have appeared in many movies that also feature large casts. Other methods of finding central actors are therefore also needed. One such measure is "betweenness centrality", which considers the number of shortest paths in a network that pass through a particular node. This helps to detect the "middlemen" that serve as a links between different parts of a network. A useful analogy can be drawn with road networks of cities. Short driving routes across a city will often pass through the same locations in the road network. As a result, the nodes at these locations are considered more "central" and important to the network.

In social networks we can do similar things by looking at the shortest paths between actors and then identifying actors that always seem to appear on these paths. According to these measures, the top five most central actors are now Christopher Lee, Michael Caine, Harvey Keitel, Christopher Plummer and Robert De Niro. By comparison, none of this year's recipients of acting Oscars appears in the top 1,000 of this list.

It is noticeable that the top actors in these lists have all had very long acting careers. Their being middlemen then is natural since long careers bring about more acting opportunities, helping to improve an actor's network connectivity. So how do today's Oscar winners compare? Right now it seems that they have some way to go. But we really should be fair and give them a few more decades before making a final judgement.

 

 

Rhyd Lewis, Reader in Mathematics, Cardiff University.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Photo by sergio souza from Pexels

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Time to End Single-House Zoning? [feedly]

A compelling argument, IMO, on grounds of both efficiency and affordability and for the preservation of green space, to promote housing density and the commercial concentrations it would encourage (e.g. walkable communities). Apples, IMO, to both rural AND urban housing development. 
But try talking that to real estate developers, who tend to dominate city and town govts, disproportionally

Time to End Single-House Zoning?
http://conversableeconomist.blogspot.com/2020/03/time-to-end-single-house-zoning.html

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What to watch on jobs day: Expected future impact of COVID-19 [feedly]

What to watch on jobs day: Expected future impact of COVID-19
https://www.epi.org/blog/what-to-watch-on-jobs-day-expected-future-impact-of-covid-19/

As COVID-19—commonly known as the coronavirus—continues to spread throughout the world, it is likely to have a direct impact on the United States through the health and well-being of our population. It is also likely to have an impact on economic activity, as workers stop working to care for themselves or their families, and people generally reduce social spending. I'll be watching this in tomorrow's job report from the Bureau of Labor Statistics, and keeping an eye on it in the coming months. The first order of business, however, is to make sure that workers can follow the Centers for Disease Control and Prevention (CDC)'s recommendations to stay home and seek medical care—if they are lucky enough to have paid sick days and health insurance. While there are still very few reported cases in the United States, it is expected to spread and the effects may be far-reaching.

In terms of the economy, there has already been an impact on the manufacturing sector as inputs from China are delayed because of temporary factory closures. The Federal Reserve has cut interest rates in expectation of further economic disruptions. Many employers are making contingencies for workers to telecommute rather than risk illness. Unfortunately, this isn't an option for millions of workers in direct service professions across the economy. Another likely side-effect of the pandemic is a pull-back on social consumption. Either because people become sick themselves or are avoiding public spaces, there will likely be a drop in certain types of spending across the economy.

The figure below takes a top-down look at the economy and shares of private-sector employment for various sectors. Manufacturing makes up 10% of private-sector employment and may report some losses in Friday's jobs report as inputs to production are delayed. The delay in inputs will likely impact construction as well. But, what about the reduction in social spending? Retail trade—minus nonstore retailers—represents 11.7% of private-sector employment. Leisure and hospitality—of which food services and drinking places are a major part—will likely experience a downturn. This sector represents 12.9% of overall employment. Other services—such as personal care services—represent 4.6% of the private-sector labor force. All three sectors combined represent over one-fourth (29.2%) of private-sector employment. If consumption drops as it is expected to, employment in these sectors may experience short-term, but serious losses.

Figure A

Education and health services are likely to be impacted as well. If schools close temporarily, students will have to stay home and parents will be even more strapped to continue working through that period. Health services—which alone makes up about one-eighth of private-sector employment—will be pressed to provide health care to all who need it.

While I'll be watching upcoming job reports to look for signs of COVID-19 in the employment data, policymakers can act now to mitigate harm and plan for the future.

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America's Jobs Engine Braces for Virus Hit After Steady February [feedly]

America's Jobs Engine Braces for Virus Hit After Steady February
https://www.bloomberg.com/news/articles/2020-03-05/america-s-jobs-engine-braces-for-virus-hit-after-steady-february

America's streak of robust job gains is being threatened by a spreading coronavirus that's roiling financial markets and may exact a growing toll on the U.S. economy.

Friday's employment report is projected to show payrolls increased 175,000 in February, below January's pace but in line with the average of the past year, according to a Bloomberg survey of economists. The unemployment rate is seen holding near a 50-year low as wages keep marching higher.

But the February data, and what they say about the labor market's health and momentum, may already be outdated ahead of such a unique economic shock. The Federal Reserve this week cut interest rates half a percentage point in response to the growing outbreak. While the virus probably failed to dent February hiring, America's jobs engine is unlikely to be immune to its effects.

"Conferences and meetings are getting canceled; travel, business travel is getting canceled," said Stephen Gallagher, chief U.S. economist at Societe Generale SA. "How much are you going to hire in March? How much are you going to hire in April? You're going to slow down."

MEDIAN ESTIMATES FOR FEBRUARY JOBS REPORT
Total payrolls rise 175,000; private payrolls up 160,000 Unemployment rate holds at 3.6% Average hourly earnings up 0.3% from prior month, 3% from a year earlier

The potential of the virus "to spill over into sectors that are responsible for a lot more of hiring and jobs in this country I think presents an added degree of risk that we haven't seen yet this cycle," said Sarah House, senior economist at Wells Fargo & Co.

Data on Thursday showed no broad impact yet from the virus. Filings for unemployment benefits fell by 3,000 to 216,000 last week, remaining near a half-century low, according to the Labor Department.

Temporary hiring for the 2020 census is likely to inflate the headline number in the coming months, though the effect in February was probably relatively small.

Here are a few ways the coronavirus could filter through future employment reports:

Leisure and Hospitality

As the coronavirus spreads and the death toll rises, more companies have restricted non-essential business travel, some Americans have canceled personal trips and the U.S. has expanded travel restrictions. Conferences have been postponed, canceled or shifted to "virtual" formats.

The leisure and hospitality sector makes up about 11% of total nonfarm U.S. employment and may be one of the first to show a noticeable impact from the virus.

Leisure and Hospitality Jobs

As historical sites close and events are canceled, coronavirus could dent hiring

Source: U.S. Department of Labor, Jan. 2020 data

These industries are "right in the target in terms of all these cancellations of events in an effort to contain the spread of the virus," Gallagher said.

What Bloomberg's Economists Say

"The fast breaking nature of the Covid-19 outbreak materially changes the relevance of incoming economic data... The knock to economic growth from the recent market selloff will similarly weigh on the pace of job creation in the near term."

-- Carl Riccadonna, Yelena Shulyatyeva, Andrew Husby and Eliza Winger

Click here for the full note.

Transportation and Warehousing

Another sector poised for a sizable hit is transportation and warehousing as travel plans change and supply-chain disruptions alter delivery schedules.

Airline employment may stall or decline amid flight cutbacks, with United Airlines saying Wednesday it's freezing hiring through June 30. Payrolls tumbled following the September 11 attacks and the SARS outbreak as many Americans chose not to fly; employment in the industry has yet to fully recover.

Additionally, the virus has disrupted supply chains and slowed port activity. Cargo traffic through the Port of Los Angeles was down about 25% in February amid canceled ship sailings, according to its executive director.

Manufacturing

Caught in the crossfire of trade uncertainty, slowing global demand and Boeing Co.'s 737 Max production halt, manufacturing employment has been anemic during the past year. The February report is forecast to show a third straight decline in factory jobs, and the coronavirus stands to weaken the sector even more.

Timothy Fiore, chair of the Institute for Supply Management's manufacturing survey committee, said there were a lot more comments in the group's latest report about actively managing the labor force through layoffs.

As global demand diminishes because of the virus, "staffing levels will have to be managed more likely through layoffs rather than just attrition," Fiore said.

Hours Worked

The average workweek also may begin to dip and overtime hours could decline. While working from home shouldn't impact this number, less consumer spending ultimately could.

While it may be too soon to forecast what will happen to wage growth from Covid-19, the decline in hours could impact the take-home pay of Americans even if the average hourly wage continues to rise.

Still, there may be some delay "before you see a real decisive change in trend," said Michelle Meyer, head of U.S. economics at Bank of America Corp.

— With assistance by Chris Middleton

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Economic policy and Covid-19—Mitigate harm and plan for the future: A list of considerations for policymakers [feedly]

Economic policy and Covid-19—Mitigate harm and plan for the future: A list of considerations for policymakers
https://www.epi.org/blog/economic-policy-and-covid-19-mitigate-harm-and-plan-for-the-future-a-list-of-considerations-for-policy-makers/

The direct cost that Covid-19 inflicts on human health is obviously its most important effect on society. But this direct cost can be worsened by flawed economic and policy structures. And the indirect damage the disease causes through economic ripple effects could be large, so policymakers should do everything they can to minimize them.

Past decisions that have weakened our economic policy infrastructure will hamper our response to Covid-19; this is already baked into the cake. But there are some short-run ameliorative actions we can take that might help, and there are long-run policy changes that will aid our response to future epidemics.

In technical economic terms, Covid-19 combines potential supply shocks with sector-specific demand shocks. Basically, supply shocks hamper our ability to produce goods and services, and demand shocks are sharp cutbacks in spending from households, businesses, or governments. I provide a list for policymakers of what could/should be considered to deal with some of these below.

The supply shocks come from disrupted global value chains, as, for example, Chinese production of inputs used by U.S. manufacturing and construction firms are not delivered on time because Chinese factories have temporarily closed. In countries where schools are shut down for long periods of time, a shock to labor supply can occur as working parents have to stay home to care for kids.

The potential sector-specific demand shock is to businesses where consumption is largely social—done with other people around. Think bars, restaurants, grocery stores, and malls. As people avoid social contact to minimize disease transmission, this leads to less activity in these sectors.

These effects mean it will be hard indeed for policymakers to spare the economy any pain from this.

There's very little that can be done about the supply-side shocks—particularly in the short run. Demand-side shocks are generally easier to address with policy (in theory—policymakers still often fumble the ball in this regard), but the specific nature of the demand shocks associated with Covid-19 make them slightly harder to address. Simply giving households more money won't boost consumption much in the sectors likely to be affected—the pullback in consumption is not driven by income constraints, but due to concerns over catching the illness.

This means that while traditional stimulus can be useful in keeping this sector-specific demand shock from spilling over to the economy more widely, it likely will not be able to completely neutralize the effects of this sector-specific shock.

What are the types of things policymakers should be thinking about as they wrestle with the economic effects of Covid-19 and (hopefully) think about the next epidemic? In the long run, the list is obvious.

• Halt the steady downward trend of non-defense discretionary spending in the federal budget. This portion of the budget funds agencies like the Centers for Disease Control and Prevention (CDC) and the National Institutes of Health (NIH). Higher levels of this spending could also finance greater aid to states, including for public investments like universal high-speed broadband. This would allow many businesses to continue to operate during the next epidemic with many employees working remotely to avoid spreading the illness. Non-defense discretionary spending has been cut to the bone in recent decades, and the result is a less robust public health infrastructure.

• Make paid sick leave a basic mandated labor standard. Far too many low-wage workers in the United States are compelled to work even when sick because they aren't paid otherwise. Paid sick leave has been shown to significantly reduce the spread of disease—this is a major benefit.

• Reform the U.S. health system to expand coverage and reduce cost. Epidemics thrive on people reluctant to obtain health care because of its financial burden.

• Reform unemployment insurance (UI). The UI system provides income support to laid-off workers so that temporary spells of joblessness (like those caused by the cutback in social consumption and its spillover benefits) are less damaging. In recent years, state cutbacks to UI generosity and eligibility have greatly weakened the readiness of the UI system for an economic shock. Besides helping individual recipients, by supporting laid-off workers' incomes and consumption during their period of joblessness, UI keeps this initial shock from snowballing into a wider slowdown.

But all of these options will take a long time to phase in and will likely miss the current Covid-19 epidemic. Is there anything in the short run we could do to blunt the potential economic pain of Covid-19?

• The federal government could commit to picking up the tab for all Covid-19-related health spending. The South Korean government made this commitment early on in the Covid-19 outbreak. An obscure provision in the law governing Medicare allows governments to expand its coverage to anybody experiencing health costs due to an environmental emergency. Would anybody really complain if this was used to cover all costs from the coronavirus?

• Congress could pass measures to provide short-term cash payments to households. This could plug some (but likely not all) of the demand hole caused by the cutback of social consumption. These payments would yield the highest bang-for-buck if they are targeted at low- and moderate-income households. This means by definition that centering income tax cuts as a mechanism for this is the wrong approach.

• Congress could increase funds temporarily for short-time compensation (STC) benefits. STC benefits essentially make up the income difference for workers who have their hours of work reduced. Congress could provide a premium to STC benefits for the duration of the virus. This would encourage sectors exposed to the Covid-19 demand shock—like restaurants—to cut hours across the board rather than lay off workers. A number of states have decent existing infrastructure to allow this kind of work-sharing.

• Congress could enact temporary payroll tax cuts (both to workers and to employers) and mandate temporary paid sick leave. Payroll tax cuts could provide demand stimulus generally but also give firms affected by the temporary cutback in spending some breathing room to pay bills during the demand slowdown. The employer-side payroll tax cut would help firms finance the week of mandated paid sick leave. As always, any temporary cut to payroll taxes must be accompanied by provisions to hold harmless the trust funds (Social Security and Medicare, most importantly) that these taxes finance.

Perhaps notably absent from this list is anything about the Federal Reserve, even as the Fed's response—culminating in today's decision to cut interest rates by half a percent—occupied much of the economic commentary surrounding the response to Covid-19. The Federal Reserve is a hugely important economic institution, and their decisions matter a lot for many reasons—but they're largely a sideshow in the response to Covid-19. For one thing, their main instrument to boost demand (cutting interest rates) operates with a lag that is long enough to likely miss much of the epidemic's duration. Further, unlike fiscal policy responses, the Fed's tool really cannot be tailored or targeted in any way to alleviate particular distress. If a knock-on effect of the economic damage done by Covid-19 includes distress in the financial sector, then the Fed can usefully provide liquidity and other support to banks (in exchange for banks' forbearance in collecting debts from affected businesses). But in the first round of response, it seems like focusing on what the Fed will do is a bit of a distraction. Economic policy commentary has become far too Fed-centric over the past decade. We really need to start thinking of a much richer set of economic tools that can solve society's problems in coming years

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