President Trump’s announcement that he plans on having the US economy re-open by Easter has proved controversial. Yet whether or not we agree, the move usefully highlights the limits of the trade-off between economic growth and containment of the COVID-19 epidemic.
With a vaccine at least 12-18 months away, keeping our economies shut down until the epidemic ends would cause not just the care of COVID-19 patients to unravel, but basic social functions as well. If we keep cranking out ever-larger stimulus packages while stopping the production of goods and services, we will eventually end up with hyperinflation, since money will grow exponentially while output will contract deeply. Hyperinflation would arrive faster in countries such with low central bank credibility, for instance Argentina, than say in Germany. But even Germany witnessed hyperinflation after World War I when its money printing spiralled out of control.
TO READ THIS HIVE EXCLUSIVE
SUBSCRIBE TO MACRO HIVE PRIME