"Superspreaders" try to self-cure

Posted by: Paul Donovan

05 Mar 2020
  • The economic impact of the coronavirus is about fear. Social media is a "superspreader" of fear. Various social media companies are now (somewhat late) starting policies to try to control fake news about the virus.
  • The virus is a moderate supply shock unless large numbers of people are too ill to work. It is a more significant demand shock. Interest rate and fiscal policy can do nothing to boost supply near term. Policy can deal with negative effects of supply shocks (e.g. cash flow problems).
  • Lower interest rates will not give consumers the courage to step into a mall or onto a plane. Grand fiscal gestures take time to change demand. Monetary and fiscal policy may reduce fear about the economy, however. Policies like closing schools may have an impact as behavior changes. Closing schools may be a mild economic stimulus (depending on how many parents take unpaid leave from work).
  • The data calendar will continue to be overlooked. US productivity and factory orders data are due. Bank of England Chief Economist Haldane is speaking. Obviously all chief economists should be listened to with reverence and awe, but this may offer a chance for a more sophisticated assessment of policy than "rates down, good".

Explore more CIO Daily Updates