By LUKE CURTIS
With nations across the globe fighting to mitigate an unknown enemy in the Novel Coronavirus, or simply COVID-19, countries have poured in billions to try to mitigate its spread as the number of cases outside China continues to grow.
As the United States tries to grapple with this pandemic, it has come across one obstacle that has forced the Federal Government to take a pause at its response: the artificial stimulation of the economy. As the White House has attempted to contain this crisis, large corporations plead for government assistance, with crashing stocks have brought the gears of the country’s economy to a virtual standstill.
As of now, the Trump Administration has been struggling to address this economic fiasco in a safe, rapid, and effective manner. However, it cannot due to a series of decisions that has put the United States at risk of a second crisis that could upend America.
As the torch was passed from the Obama Administration to the Trump Presidency, the stock market and the economy has seen strong gains as a result of the unemployment rate being the lowest it has been in the last fifty years. With the Federal Open Market Committee (FOMC) implementing low interest rates, the open floodgates of cash reserves resulted in financial resources being available to the majority of Americans.
As the stock market surged with stockbrokers, citizens, and others trading, the Dow Jones (representing the 30 largest companies in America), S&P 500 (represents the 500 largest companies in the U.S.), and NASDAQ (includes tech, biotech, internet related stocks) achieved record gains. This was seen as the possible peak of an existing 11-year bull market that energized the American economy in 2009, after Obama’s attempt to stimulate the economy after the Great Recession of 2008.
With this spike in success, the FOMC eagerly decided to lower interest rates even more in order to prompt more spending within all sectors. In today’s current situation, this has caused major problems for America.
The Federal Government’s short-term vision and lack of restraint has had major ramifications concerning the Coronavirus Pandemic. As a total reflection of the entire stock market, the Dow Jones has dropped 2,997 points (or 12.9%), marking the worst point drop ever within its history as a stock asset. This has caused Americans to be wary about investing in the market, potentially creating panic among wary investors and causing them to pull their money out of assets in order to protect their greenbacks.
This has created a potential stall within the markets, as many people worry about their long-term investments going to ruin. Furthermore, large companies are finding their cash reserves running dry, and many are reaching out to their credit lines (through banks) to draw out sufficient cash to stay afloat.
As the grim picture of the country’s economy continues to be painted, the FOMC has contemplated lowering interest rates further. The goal of this would be to stimulate company spending to sustain services that are being hit hard by this crisis, as well as regular national spending in every consumer sector.
The problem with this possible decision comes down to basic economics. With capital already being so accessible, the lowering of interest rates would push more money into national circulation. This leads to inflation, and money thus becomes worthless as a result, resulting in America being able to pay for any resources that are needed to aid the fight against this crisis.
If the Federal Government wasn’t so eager to stimulate the economy artificially, even though we were at such an unprecedented level of success before, we wouldn’t be lacking the resources we need as a country. Few could have predicted an economic catastrophe of this magnitude or a pandemic of epic proportions.
However, short-sightedness rarely pays off from an economic standpoint that sustains the lifestyles of 327 million Americans. Balance in long-term investment within national infrastructure, healthcare, and other needed sectors is a much more sustainable way to stimulate the economy than short stunts of national spending.
An idea like the FOMC’s proposal to cut interest rates is like a bandaid with poor adhesive properties. It is an attempt at covering a severe case of external bleeding with something as rudimentary as a bandage. A simple fix is not going to solve a problem that will have long term implications on America’s financial future.
America’s growth depends on our national long-term vision, not our short-term ambitions. As Americans, we dwell on the past, plan for the present, and dream of the future. It is time for us to put our past regrets behind us, to learn within the current moment, and apply those lessons to our later endeavors. During the Space Race, President John F. Kennedy stated that as a nation we would strive to do difficult things, not because they were grand achievements, but because they revealed the testament of the American character.
In the future, we need to guide America’s economic interests to rebuild what we lost: the interconnectedness of America as a whole. Our roads are crumbling, our healthcare systems (especially in this instance) are strained with too little resources, among many other problems.
Instead of attempting to paint a rosy picture of financial welfare for all and a strong economy by artificially stimulating the markets, why don’t we first promote the welfare of all by fixing what’s broken. That’s what the Federal Government needs to do. An interconnected country is a healthy America. Let’s come together in our neighborhoods, cities, and states to call for the betterment of our communities.