“I see the light at the end of the tunnel.”


It was 1983 when Mark Gertler met Ben Bernanke, the future chairman of the Federal Reserve, at a summer residence. Years later, in 1989, they published work on the impact of financial crises on the real economy and broke the taboo that markets were perfect. Both won the BBVA Frontiers of Knowledge award in economics this week.

Financial policy

“Biden’s bailout isn’t perfect, but it’s good for everyone.”

How would you rate the recent improvement in employment in the United States?

All of them are very positive data and reflect the results of the vaccine in the background. Everything indicates that it will be available at the end of May, whereas it was previously thought that it would be available at the end of July. And at the beginning of the year we were talking about September! Companies hire with the future in mind: they are increasingly optimistic.

Joe Biden’s bailout going in the right direction?

Not perfect. We can say that some elements are not well targeted, as well as some stimuli that will save more than they spend. But in general, we have to recognize that it is good for the economy. Part of the funds will be allocated to speed up the vaccination campaign, which is necessary. There are areas of the economy that need relief, and this plan will give it to you. We are still in a period of transition. The biggest risk is an explosion in public debt. But that’s not a problem, with relatively low interest rates.

What is the difference between the 2008 crisis and the current crisis?

real. Excessive exposure and risk were then assumed. It all started with the real estate industry. Families applied for loans and got into debt. And many of them didn’t know where they were going. When the bubble burst, it went bankrupt, access to credit declined, and banks were hit hard. The entities recorded losses in their portfolios and this weakness extends to the rest with a widespread credit crunch. Now the problem is the virus. But the economy was in good shape before the pandemic hit. In the months of March and April 2020, we are faced with a kind of financial crisis. Small businesses were in debt. But then there was a violent stabilization intervention by the Federal Reserve. We have learned a lesson from the past.

You no longer have central bank tools?

Monetary policy, in terms of stimuli, has reached its limits. Interest rates are zero. But they can still act as gatekeepers against the possibility of further financial crises, as a safety net in case mistakes happen again.

This is where fiscal policy comes in.

This crisis is that it affects different sectors unevenly. Those most exposed to the virus have surplus workers, who have received little training. Fiscal policy should help them. On the other hand, a fraction of the economy is doing well now, so I see the light at the end of the tunnel.

Are you not worried about a possible resumption of inflation?

Fear is not the word, it is extremely powerful. But it is something that we have to watch out for. Today there is still overcapacity in the economy. I think we could see the inflation rate above 2% or even 2.5%, but the Federal Reserve will take action on this issue. Are we going back to the scene of the seventies? Well no.

What does the epidemic leave us?

Before the coronavirus, the biggest problem was inequality. The coronavirus has made this factor worse. We have seen stores and businesses suffer from e-commerce. Amazon cannot absorb all of this labor. The losses will be significant and permanent in certain sectors.

Once this is over, will the Roaring Twenties arrive?

If immunity is obtained, I would expect strong growth in the economy over a long period of time, except in certain sectors. A lot of people want vacations and they want vacations.

What position should the United States have vis-à-vis China?

Cheating China. There are legitimate issues with this country with intellectual property. There are elements to study and problems to be solved.

Will Donald Trump stand for re-election?

It’s possible. But I do not hope. With Trump, a parallel reality arose, which was not true, but many citizens believe in it. Before him, we could have agreed on some basic facts and principles. But when you enter a world with alternate versions of events …

But his financial balance was good. or not?

If you look at the numbers, the Trump economy was a continuation of the Obama economy. Employment growth in his first three years was lower than in the last three years of his previous presidency. His only political gesture was a tax cut which had little effect and added 1.5 trillion in debt.


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