We have seen an unprecedented response to manage the current health crisis. This has led to significant economic damage, as countries implement social distancing to manage the health of their populations. To provide economic support, quantitative easing has been implemented on an industrial scale, with central banks rapidly expanding the range of financial assets they are willing to buy. Also, governments have stepped up to the plate, aggressively implementing fiscal packages that will see budget deficits similar only to periods of war. As at the time of writing, policy makers around the world have provided a total of US$7tr of QE, US$6tr of fiscal policy, and US$4tr in loan loss guarantees.
Has QE become less effective?
What about Pandemic economics?
Will debt levels be sustainable?
Is the extraordinary policy response likely to cause inflation?
In this note, Simon Stevenson, Deputy Head of the Schroders Multi Asset team, examines the strengths and weaknesses of the various policy responses, the economic impact of pandemics, and the likely medium-term consequences of the policy actions.
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