QE is the best way to go to quell the Covid-19 economic crisis
A government stimulus package that is too small will wreak far greater havoc down the road than one too big
SA faces its biggest economic crisis ever. The government’s announced R500bn package is a good start, but indications are that the stimulus is too small. A larger stimulus cannot be financed using conventional mechanisms. Instead, the government must use quantitative easing (QE), both to offset the collapse in demand and to finance government expenditure.
Interest rate cuts will help, but the response to this crisis has to be driven by fiscal policy because only fiscal policy can replace lost wages and revenue. An inadequate stimulus risks turning a recession into a depression...
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