Many are afraid Governor Kemp is opening the economy too soon, but more stimulus checks are not the solution.
People are out of work and short on money. Easy money is the alternative to opening back up the economy. The Federal Government brokered a deal with the Federal Reserve to fund the CARES Act with easy money. We have reason now more than ever to expand credit and be altruistic.
However, publicly and privately, we have been running up the debt clocks ad infinitum. We have leveraged ourselves over $24-trillion in Federal debt, almost $60-billion in Georgia State & Local debt, and, according to the New York Federal Reserve in 2019, a US consumer debt of nearly $14-trillion.
How did we accumulate so much debt? There are many reasons, but the most enabling of them all is low-interest rates. Low-interest rates incentivize borrowing over savings. How are interest rates determined, you might ask? The Market of Loanable Funds determines interest via the supply and demand for credit. Jerome Powell, Chair of the Federal Reserve, arbitrates the supply of credit. Thus, the Chair regulates the rate of interest, not the free-market.
Had we properly priced credit, we would’ve been better prepared. A free-market system tends toward equilibrium between spending, savings, and investing. Given the dire circumstances, we ought to think very carefully about how to prepare for the next crisis and rethink our “modern monetary theory” that has encouraged an extraordinary accumulation of debt, leaving us without recourse but to open back up the economy.