The ongoing economic collapse isn’t due to a lack of money, but rather a lack of goods and services being produced due to coronavirus lockdowns across the US.
Thus it shouldn’t be expected that Congress and the Federal Reserve can stop a recession by simply printing and distributing money to Americans.
“Contrary to the actions taken and the assurances made by these authorities, the economic fallout from COVID-19 is not due to a scarcity of money, but a scarcity of goods and services,” wrote James Talocka for the Mises Institute. “…It is production alone that brings about the means for consumption. [French classic economist] J.B. Say reminds us that there is no need to worry about a lack of consumption, because production always falls short of man’s wants.”
“This is especially true under current economic conditions.”
It’s human nature to have unlimited wants, and the entire field of economics is about adjusting limited resources to make the most of people’s unlimited demands.
In short, the ongoing economic collapse is fueled in part due to the lack of production from nationwide lockdowns, and thus a lack of demand.
“The federal government is not only resorting to unproductive consumption through fiscal and monetary stimulus efforts, it is not even generating real demand,” Talocka continued. “J.B. Say points out that for demand to exist, goods must be produced for the purpose of exchange, goods which the government does not provide.”
That said, even if the lockdowns were to end tomorrow, the economy won’t immediately catapult back to pre-virus levels because, frankly speaking, the coronavirus also triggered a market correction in which the most debt-riddled businesses are going bankrupt.
Americans are also realizing that a debt-based consumer lifestyle is not sustainable when state governments can shut down the spigots of the economy without warning, which is partly why consumers are repaying their credit card debt at record rates.
“Consumer borrowing declined by $12 billion in March, the first time overall debt has fallen since August 2011, according to the central bank. The decline in percentage terms was 3.4%,” reported AP. “Borrowing in the category that covers credit cards dropped by $28.2 billion or 30.9%, the biggest percentage decline since January 1989.”
The other factor is that, due to the lockdowns, consumers don’t have much to buy right now which will put them in further debt.
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