Minneapolis Fed President: Flatten the curve for the economy too
Minneapolis Federal Reserve Bank President discusses nation’s prognosis for an economy in recession
Minneapolis Federal Reserve Bank President Neel Kashkari discusses the United States’s prognosis for an economy in recession in an interview with FOX 9’s Tom Lyden. See why Kashkari calls the current economic climate like a “hurricane," and why he thinks local spending could help if you can afford it.
MINNEAPOLIS (FOX 9) - With the Federal Reserve dumping $1 trillion of liquidity into the credit and financial markets, FOX 9 Investigator Tom Lyden talked to Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, about federal checks possibly going out to every American and the long term prognosis for the economy during a pandemic.
“It’s literally like a hurricane, but it’s hitting the whole US economy at the same time,” said Kashkari, standing a safe distance away outside the Fed Bank in downtown Minneapolis. “It’s unprecedented.”
When asked about Treasury Secretary Steve Mnuchin’s plan to send checks to every American, which still needs Congressional approval, Kashkari said time is of the essence.
Ideally there would be some type of needs assessment, but that would take too long to determine, said Kashkari. President Trump said Tuesday that checks would not go to millionaires.
“This is going to be a powerfully bad downturn. Small businesses are going to suffer, restaurants, bars, coffee shops, and health clubs, they’re going to be laying off workers, those workers need help,” said Kashkari.
Health officials have said it is important to “flatten the curve” of new infections through social distancing and closing schools, universities, and businesses.
Kashkari said that is also a good prescription for the economy, but there are trade-offs. “Flattening the curve prolongs the outbreak,” which isn’t good for the economy, he said. But it also reduces the number of infections and keeps the health care system from being overrun with patients.
He said the fundamentals of the economy were strong in January and the first half of February, and the Fed is using its tools to add liquidity to the credit and financial markets. “We are trying to buy time as well,” said Kashkari.
“The length of the recession is going to be determined by the virus,” said Kashkari, who points to South Korea and Japan as countries that adapted quickly without shutting down their entire economies. “That’s the good scenario.”
“If we end up being like Italy and we have to shut down the whole economy, it could be months, and then the question is how fast is the economy on the way out.
“If thousands of small business across America end up shuttering and laying off their workers, it could take us a long time to rebuild the economy and bring those workers back in. That’s what we want to avoid right now,” said Kashkari.
Asked to suggest three things ordinary Americans can do to help the economy, Kashkari did not hesitate.
“We should really take social distancing seriously,” said Kashkari, pointing out the vast majority of employees at the Fed Bank are working remotely.
“Number two, spend locally, go to your local restaurants and get take out food. They need the money,” said Kashkari.
“And listen to what government leaders are saying and follow their guidance.” Kashkari gave Governor Walz and Minnesota health officials high marks for handling the pandemic response so far.
“If we do the right things, we’ll get through it together.”