Is the Central Bank printing money a valid response to a financial crisis to boost the US economy? Global stock markets and investors were buoyed by the Federal Reserve’s efforts and the prospect of Congress backing a fiscal stimulus package. The rally on US and European stock markets followed gains in Asia overnight. It is all in the wake of the US Central Bank’s move to launch an unlimited money-printing program.
Economic Meltdown
The world’s seven key western economies also sought to calm mounting fears of a global depression. Is printing money a valid response to a financial crisis to get us through the coronavirus pandemic? Despite the stock market rallies, early warning signs for developed economies showed the steepest plunge in business activity on record in Britain, Japan and the Eurozone. Several countries effectively shut down large parts of their economies. G7 nations said it would take further steps to contain the spread of the virus. They would unite to lead the fightback against the economic meltdown.
G7 Countries on Financial Crisis
Is printing money a valid response to a financial crisis? A press release issuing a joint statement from the group of wealthy nations said: “We will do whatever is necessary to restore confidence and economic growth and to protect jobs, businesses, and the resilience of the financial system.” Finance ministries of Canada, France, Germany, Italy, Japan, the UK and the US – will coordinate weekly. They promised to take further measures when needed to cushion the economic blow, according to the statement.
Purchasing Managers Indices (PMI)
Moreover, policies to support jobs and growth will be used for as long as necessary. To quote “We also pledge to promote global trade and investment to underpin prosperity,” the G7 said. Is printing money a valid response to a financial crisis? The G7 intervention came as closely watched surveys of business activity revealed the early economic damage from the rapidly escalating crisis. The Purchasing Managers Indices (PMI) for the UK, Japan and the Eurozone plunged to the lowest levels since the PMI record.
Survey Index
The flash PMI for the UK’s dominant service sector crashed to 35.7 percent on an index where anything below 50 represents contraction. This includes restaurants, hotels, and banks, and accounts for about 80 percent of the UK economy. Is printing money a valid response to a financial crisis due to the collapse of the index? The latest surveys in the US showed private sector activity contracting at the fastest rate since the depths of the financial crisis in 2009. This includes the stock market crash across the Eurozone, which crashed by the greatest extent ever recorded by the data firm IHS Markit. In a potential prelude to a deep recession around the world, Germany and France also plunged to record lows.
Global Financial Crisis
Activity in Japan’s service sector also dropped by the most since its PMI records began. Is printing money a valid response to a financial crisis as economists warned that the reading was especially a worry. Therefore, indicating that the collapse inactivity in Europe could worsen over the coming weeks.
Fiscal Stimulus Plan
Despite the worsening economic outlook stock markets rallied on Tuesday to halt a plunge in recent weeks. Is printing money a valid response to a financial crisis as hopes mount for greater coordination between the world’s biggest economic superpowers. The Congress in Washington inched towards agreeing with a bipartisan deal on a fiscal stimulus plan. It shows that the Fed will do anything to fire up a glaring shortage of US dollars. Analysts at Evercore ISI estimate it may end up in the ballpark at 5 Trillion dollars.
