On April 9, 2020, Federal Reserve Chair Jerome H. Powell declared that the American economy is in an emergency and is destabilizing “with alarming speed.”
These comments came right after the Fed unleashed its over $2 trillion in new loans to prop up the economy as the majority of the country enter a lockdown to combat the expansion of the Wuhan Virus.
“People have been asked to put their lives and livelihoods on hold, at significant economic and personal cost,” Powell said during a Brookings Institution webcast. “We are moving with alarming speed from 50-year lows in unemployment to what will likely be very high, although temporary, levels.”
Powell urged for there to be a national discussion about what will be needed to reopen the economy. However, he cautioned about moving too quickly and causing Wuhan Virus cases and deaths to increase. Treasury Secretary Steven Mnuchin believes it’s possible that businesses can open up again in May. Powell, on the other hand, believes that after July that is more likely to happen.
Over 17 million Americans have filed for jobless claims in the past four weeks as the nation has been shut down due to the global pandemic, according to reports from the Labor Department. Powell proclaimed that the burdens of the shutdown are “falling most heavily on those least able to carry them,” and he promised to do everything he can to help out.
The Fed’s sweeping new loan programs unveiled Thursday will provide $2 trillion in additional aid to small, medium and large companies as well as cash-strapped states and cities. The latest actions are in addition to the central bank slashing interest rates to zero in March and buying numerous government bonds in an effort to keep borrowing as cheap as possible for American families and businesses.
“Our emergency measures are reserved for truly rare circumstances, such as those we face today,” Powell stated. “There is every reason to believe that the economic rebound, when it comes, can be robust.”
The Fed is also buying up a large number of other debts to make sure Americans still get access to home mortgages, auto loans and other forms of borrowing. Powell also announced on April 9 that the Fed is providing loans to companies and states, but he is not giving money outright. The Fed is expecting to be repaid.
The fundamentals of the American economy are not sound, and the Fed’s actions show that it is committed to controlling the American economy and pursuing easy money policies via interest rate manipulation.
The end result will be horrendous for Americans, as the next bubble pops and many Americans have to brave another economic downturn.