Massive government-enforced lockdowns and their cascading economic effects have put tens of millions of people out of work. Through no fault of their own, many have been reduced to dire straits and are now scrambling to find ways to support themselves. Politicians—attempting to help those whom they’ve kept from working and resuscitate markets that their lockdowns have extinguished—have united around the notion that governments must provide “stimulus.”

In the United States, the Coronavirus Aid, Relief, and Economic Security Act (CARES)—which passed unanimously in the Senate and by an overwhelming majority in the House—is a $2.2 trillion stimulus package for families, businesses, and even government agencies. Already the largest stimulus package in history—far surpassing the $700 billion TARP program of 2008—it’s likely to be only the first of multiple waves of such spending.

In addition, the Federal Reserve has used normal discretionary and emergency powers (known as the “13-3 authority”) to set interest rates to near zero, promise virtually unlimited loans to banks, purchase mortgage-backed securities, and create vast quantities of new “money” in many other ways. Central banks around the world—including the People’s Bank of China, European Central Bank, Bank of England, and Bank of Japan—all have taken similar steps.

Clearly, when people are locked down and cannot work, they need some means of supporting themselves. But are stimulus packages and related financial manipulations a good solution to this problem? What will be their consequences? . . .

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