Illustration: Sarah Grillo/Axios
A crisis is a terrible thing to waste. The coronavirus crisis is a dress rehearsal for the climate crisis: It will help show us not only what is possible, but also, crucially, whether or not those actions work.
Why it matters: There has never been a better time for big financial ideas to become reality.
- The natural conservatism of rich governments has evaporated in the face of the global pandemic. They've already implemented more than $8 trillion in fiscal action, and many more policies are being proposed.
- The biggest fiscal idea of them all, the Green New Deal, will have to wait at least until after the pandemic has been brought under control. But the main opposition to the GND is centered on its cost, and the potential negative consequences of enormous government borrowing and spending.
- We're about to find out, in countries around the world, whether massive government deficits prove to be inflationary. If they do, that's bad news for the GND. But if they don't, many of the arguments against it are effectively defanged.
The big picture: "For everything except the financial markets, time has stopped," Nobel economics laureate Joe Stiglitz tells Axios. But capitalism is based on the flow of money. Now that many of those flows have stopped, governments are attempting to magic replacement flows out of thin air.
- In a normally functioning economy, Stiglitz says, "I’m supposed to be able to pay you because I’ve earned money, not because I've received a gift from the government. We’re suspending the system of accountability, which is money."
The bottom line: Addressing the current economic crisis means finding innovative ways to create new flows of money, fast. The good news is that there are almost no technical obstacles to doing that. Money is invisible and electronic; it can be created at the press of a button.
- There's still one taboo: Central banks have shied away from simply printing money, as opposed to lending it to banks, governments and others and expecting repayment in the future. They'll do most anything else, however.