Economic Crisis Leaves US Government Officials in State of Confusion

The continuing economic trauma from the COVID-19 crisis has left US government officials in a state of confusion. While some argue for opening the economy, others are advocating for a complete shutdown.

The lack of clear economic policy direction is becoming more and more apparent as the crisis unfolds. The difficulty appears to be the potential impact of another shutdown weighed against the continued economic stagnation from partial closures.

US Economy Bleeding Out

The Federal Reserve Bank of Minneapolis President Neel Kashkari is on the side of complete closure. In an op-ed piece for the New York Times on Friday, he argued that the economy must be shuttered for six weeks to have any true impact.

The argument suggests that the difficulty with the shutdown was not that it lasted for too long, but that it was too short. What’s more, many did not take the lockdown seriously enough, and the virus continued to spread.

Coronavirus Finance Hub RiskCoronavirus Finance Hub Risk

Per Kashkari, this has caused a slow bleed out for the U.S. economy, as cases continue to rise and partial shutdowns remain in effect. The net result has been negative, and the only way out at this point is a hard lockdown.

However, others within the US government see a full shutdown as untenable. U.S. Treasury Secretary Steven Mnuchin argued that another shutdown would be impossible to survive.

Others want to take a more middle-of-the-road approach. In recent news, President Trump halted payroll tax for certain Americans and extended unemployment benefits.  This policy decision reflects a willingness to stay open and help to stem the bleeding due to partial lockdowns.

Slow Decline and Asset Value

As the U.S. economy limps along under the pressure of the virus, the slow decline has caused a general fear of asset value.

Stimulus packages continue to roll out, but the pressure of inflation remains high. What’s more, the stagnation of the economy under the weight of the partial lockdowns has led to fear that a recovery will be far in the future.

Together, these two difficulties have driven overall anxiety in the market that has seen store-of-value assets rise.

Gold, silver, Bitcoin, and Ethereum have all posted substantial gains in the wake of the crisis. And, while the equities markets remain strong, some argue that an end to stimulus checks will cause a massive reversal of fortunes.

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