Remarks on key episodes of Eric Fedding, President Eric Rosengren of Boston, August 12th
- Takeaway: The path of the economy will significantly depend on the course of the virus. That, limited or inconsistent efforts by states to control the virus not only puts citizens at health risk, but will also exacerbate the economic downturn.
Excerpt: “As long as the virus throws up major threats to public health, a complete economic recovery will be very difficult, as individuals, often voluntarily, avoid activities that endanger their health. […] Indeed, the trajectory of economic recovery will be determined more by the path of the virus than by the path of policy-making, although monetary and fiscal policies may limit some of the most important adverse effects, and have milder ones.
- Takeaway: Despite major interventions by monetary and fiscal policy makers, economic data suggest that recovery may lose steam, as activities in many states are again restricted, officially or voluntarily, to slow the spread of the virus.
Excerpt: “The forecast for this autumn is quite uncertain, but my opinion is that the recent slowdown in economic activity… is likely to continue. Currently, we have an unemployment rate above 10 percent, and due to the continuing spread of the virus in the community, I am concerned that the pandemic will limit the ability of the economy to recover quickly. “
- Takeaway: States that saw early recurrence saw a temporary economic advantage, but that gain has been short-lived and came at a cost – including rising rates of infections, which have resulted in lower spending recently.
Excerpt: “Removing restrictions too quickly destroys both the economy and public health along the way. In the Northeast, where restrictions were more substantial and lasted longer, states are now experiencing both better public health outcomes and more spending in sectors of the economy that are sensitive to social distance. “
- Takeaway: While both Europe and the US had significant increases in infection rates in the spring, Europe imposed stricter and longer-term shutdowns and limits, and did not reopen until the virus reached low levels. Their infection rates fell faster and further, and remained relatively low, and economic activity has been more robust.
Excerpt: “In contrast, in the United States, infection rates continue to rise because states lift safeguards too quickly and in a way that is not calibrated for the true risks posed by the virus.”
- Takeaway: Credit interruptions prolong recessions and hurt individuals and businesses, so it’s important that the Fed is ready, with the Main Street Lending Program, to facilitate credit flows that can transfer businesses and nonprofits of many sizes, at reasonable rates.
Excerpt: “The program is attractively structured for many ongoing cash flow disruptions due to the pandemic, and facilitating 5-year loans without paying interest in the first year and no principal payment until the third year. It is attractive to lenders because they can meet the credit need in their markets while retaining only 5 percent of the loan on their books, with the Federal Reserve taking a 95 percent stake in the loan . […] The Fed intends to help [entities] that … seeing the uncertain outlook, otherwise having trouble getting credit from a lender who should have 100 percent of the loan. The Main Street program can provide essential funding to help these entities avoid closing their doors and firing their employees permanently. ”
- Takeaway: Some suggest that the modest initial activity of the Main Street program is evidence of failure, but Rosengren disagrees. The program is one important way in which the Fed does everything in its power to support the businesses, nonprofits and individuals that make up our nation’s economy.
Excerpt: “The numbers seem consistent with a slow pace of initial activity that expands more as participants become familiar with the program parameters. […] Loans are contracts between lenders and banks, and the loan negotiations can take some time and effort. […] As lenders and banks have become more familiar with the program, we have seen a steady increase in loans submitted to our portal. There are currently more than $ 856 million in loans active, with more than $ 250 million in loans allocated or regulated. A lot of the increase has happened recently, and I expect we will see more. “
Short synopsis
Points 1, 2, 5 and 6 deal with the delay.
Points 3 and 4 are in praise of lockdowns.
Point 6 is a self-serving call “Don’t blame the Fed”.
What? No free money?
The 6-point synopsis was a Boston Fed summation that I posted as it is. What about more free money?
From the full speech: “Clearly, continuing stimulating monetary and fiscal policy is critical. “
Here is another cautious excerpt.
Unfortunately, as long as the virus throws up major threats to public health, a complete economic recovery will be very difficult, as individuals, often voluntarily, avoid activities that endanger their health. The increased savings figures, reflecting a falloff in consumption despite substantial fiscal transfers to individuals, illustrates the challenges facing recovery.
The word “fiscal” came up 13 times. And as expected, Rosengren wants more of it.
Besibbe charts
Here is a link to it related Boston Fed Charts.
Personal savings rate
Fallen and dead per million US vs EU
There are a total of 14 charts and figures.
Place for a lockdown
Third call for a lockdown
On August 9, I listed Yet Another Fed President Support More Free Money and a Covid Lockdown
On August 3, I noted second Fedde president calls for more free money.
Current running score
- Three promote hard lockdowns: Fed Presidents Neel Kashkari (Minneapolis) and Charles Evans (Chicago) Support Hard Lockdowns. Add Eric Rosengren (Boston) to the list.
- Four promote more free money: Fed Presidents, Neel Kashkari (Minneapolis), Charles Evans (Chicago), and Thomas Barkin (Richmond) Support More Free Money. Add Eric Rosengren (Boston) to the list.
Rosengren was much more subtle in his statements than the others, but it is clear what he is fishing for.
Heaven helps us as unemployment follows the path of the great recession
In terms of jobs, please see Heaven Help Us as unemployment follows the path of the Great Recession.
Think also of Millennials Screwed Again, This time about unemployment.
Mish
