BVI News

COMMENTARY: Stimulus won’t work

By Dickson Igwe, Contributor

As stated in an earlier article on the Corona Virus Pandemic: Corona is the joker in the pack of the present order; albeit a tragic type joker.

The west for the first time since 1945 is on a war footing. The UK is expected to plunge into a deep recession in 2020, amidst all of the Brexit Hubris. In fact, Brexit will be a short-lived memory, when recession hits, and the UK economy collapses.

And the USA has already started to experience a colossal collapse in businesses and jobs. Bank of America numbers state the USA is already in recession. Most global airlines are in deep contraction, and global tourism will lose at the most conservative of estimates, 75 million jobs over the course of the Corona Recession.

Steep recession

The USA will be in a steep recession in a matter of two months. Now, stimulus and quantitative easing have failed to lift markets and consumer confidence in the era of Corona.

Stimulus was the great success story of the Great Recession of 2008. $1 trillion dollars pumped into US banks to strengthen their balance sheets, and billions of dollars offered to specific businesses, by the Federal Reserve, and the White House, using government-backed financial instruments, pulled the world out of the deep swamp, of a long recession.

Stimulus is public spending that lifts consumer demand in an economy. Recessions are mainly driven by demand shock: a fall in consumer confidence. However, the Corona Recession of 2020 will be driven by both demand and supply shocks as both producers and consumers are being hit by the virus-driven economic slump.

Trillion-dollar stimulus

Stimulus is an economic idea of late British Economist John Maynard Keynes. OK. Stimulus saved the day in 2008, by essentially driving the idea that recapitalizing a global banking system in deep trauma, was the solution to a grave financial crisis. This was a banking system that was sinking rapidly: the result of unsustainable debt – especially mortgage debt- held by its borrowers.

And this trillion-dollar stimulus was money for banking recapitalization that sustained and delivered from collapse, deeply stressed bank balance sheets. It was cash loaned to failing banks from investors, through the Federal Reserve, and through the creation of bonds and treasury instruments that offered safe, government-guaranteed, investments, to investors at a very volatile time in world economic history.

Just as it is today, in 2008, both global finance and global market stocks, stood at the edge of the proverbial abyss. The 2008 recession was a manmade affair. A vast ocean of personal debt made up mostly of sub-prime mortgage instruments, or risky mortgages, built up to create systemic failure, and deep fractures in the tectonic plates sitting global finance.

Banking and finance collapse

A banking and finance collapse, that would have plunged the world into a catastrophic depression, or 10-year deep recession, was averted by the swift footwork of President Barack Obama, and his team of economists who adopted stimulus as the panacea to save the day. Europe’s Central Banks followed suit, and introduced quantitative easing into the financial system. Stimulus from Central Banks in Europe allowed threatened European retail banks to recapitalize, again with investor cash borrowed by Central banks from investors.

Recapitalized European banks were injected with sufficient liquidity from investors. Investors bought Central Bank Bonds and this cash from investors was used to write off the bad debt that threatened economic collapse.

Quantitative easing further allowed for the ability of banks to continue offering credit and loans to consumers and businesses. Central bank intervention ensured the survival and functioning of the global market economy- worth $87 trillion in 2020- by generating the liquidity and cash flow that serviced trade.

Supply-Side Economic type

However, the world post the Great Recession of 2008 swiftly abandoned fiscal stimulus and reverted back to a Supply-Side Economic type that saw the exponential growth of wealth inequality through Austere Economics and Trickle Down.

The businessman was king, and deregulation and public spending cuts saw the destruction of the middle classes and increasing anger and bitterness among the white working classes especially in the USA, UK, and Western Europe.

Working-class anger

That working-class anger – the result of outsourcing, and the destruction of manufacturing- saw the loss of jobs, the decline of rural towns and communities, and that in turn drove the populism, nationalism, and xenophobia, that led to the Donald Trump Pitchfork Revolution, Brexit, and the rise of nationalist populism in the west and Europe. By January 2020, Donald Trump was headed for a second term, as the US economy appeared to be firing on all six cylinders.

The Trump revolution- a heady mix of xenophobia, protectionism, and racism, was fully adopted by a base of white Republican Voters that looked up to Trump in a cult type following that assured the US President of a Second Term.

The Stock Market was in Bull territory and Trump sat in an Oval Office that oversaw the greatest and most enduring rise in the stock market, in modern times. In the UK, similar dynamics meant the UK leaving Europe, and the election of a Trump Type ‘firebrand’ born in the USA, named Boris Johnson. Both men were hubristic and blow hard types, loved by their disciples and followers.

The western world was very much being reshaped by these two men, and the populism they espoused. But far away in the Chinese city of Wuhan, a number of people were coming down with a strange illness that was characterized by a high fever and dry cough that settled eventually in the lungs, and that killed a number of patients.

This was a sickness driven by a virus termed Corona- COVID19. The belief is that the virus entered the human genome from virus-infected bats.

Copyright 2021 BVI News, Media Expressions Limited. All Rights Reserved. This material may not be published, broadcast, rewritten or distributed.


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  1. Where are the haters says:

    We wait with baited breath Igwe’s racist haters

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    • Here I am says:

      Glad to hear from the blowhard. It’s amazing that none of the first world governments have sought his expertise and immense Black knowledge. You would think that this racist bad of dung would be in high demand. It’s quite easy to sit back on your ass and make comments about things you know little of and try and mesmerize the uneducated masses of the Territory. Only his devoted readers (relatives, restaurants and restaurant servers) care to embark on the journey of his commentary. The relatives have to and the restaurants need his gluttony. Just so your all aware, haven’t read his trash nor will I. Rather have a tooth pulled.

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      • Hmmm says:

        A bit personal but otherwise fair comment

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        • Hater says:

          Why are persons identified as racists because they disagree with the opinions expressed by Igwe. I disagree with almost everything he utters but I don’t do so on race grounds – I just think he is wrong and I am USVI for generations!

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        • @ Hmmm says:

          I bet you did not brush your teeth this morning- I can smell your nasty breath from here hehehe

      • @Here I’m says:

        @Here I Am, how can you objectively ascertain what Igwe wrote is thrash if had not read? I think you peruse every Igwe commentary and enjoy them. You are just starved for attention and using Igwe to get your fill every weekend. If this how you get excited, keep reading. Or try reading Malcolm X, Mandela, Duboise, watching at television, going swimming, playing a sport (non contact), taking in a movie, going on date………etc. Make sure you exercise some social distancing to take care of yourself. Oh, and make sure you don’t trip getting to your computer to read Igwe’s article. Lol!

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      • @ here I am says:

        Go back to your virus infested sewer – racist contaminant

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      • @ here I am - on lockdown says:

        lockdown: You should be thrown into the Drake Channel- now the virus ridden UK is on lockdown and cannot take you festering racist behind back in

  2. Bro.... says:

    Nobody knows what animal actually cause this. Stop just spreading that rumour.

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  3. Online Now says:

    It’s a disappointing article full of supposition and a dislike of the two leaders.

    All I can say is I hope the world comes together over this terrible disease and we can find a way to move forward from the disruption almost everyone will experience.

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  4. Diaspora says:

    The classical group of economists espouses a laissez faire philosophy. Their response to an economic recession and inflation is to do nothing, letting the market forces, the normal business cycle return the economy to full employment. Though John Maynard Keyes was a classically trained economist, in time he concluded that the classical approach to returning the economy to full employment takes too long. Thus, given a recession, the Keynesian response is to increase government spending and reduce income taxes to spur demand.

    The Coronavirus pandemic is thrusting the US, the world’s largest economy, into a recession. Consequently, it has two approaches to returning the economy to full employment, ie, a)following the normal business cycle, which normally runs 3-4 years or longer or b) stimulating the economy, taking a shorter route to full employment.

    The best way to stimulate the economy, increasing spending and creating demand is to put money in the pockets of the poor and the lower middle class. Given money to the wealthy in theory should cause trickle down but in reality it does not. Nonetheless, providing money to people at the lower rungs of the economic ladder, results in their buying appliances, equipment, tools, electronics, furniture, construction materials, cars, clothing/apparel, toys, ….etc creating demand and enhancing supply.

    As consumer spending increases, business expand to meet increasing demand. Pumped up demand by consumers and businesses results in economic growth, returning the economy to full employment in a shorter period of time than classical approach would.

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  5. for once says:

    I agree. Handout stimulus doesn’t work.
    It didn’t work when Obama bailed out the rich banks and insurers. Too big to fail guys gave themselves bonuses and retired.
    People need jobs not a handout.
    Giving money to corporations did no good in 2008.
    Giving the little guy checks will just funnel back to the big dogs.

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  6. Here I am says:

    The virus is probably an off shoot of that racist:”Here I am”

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  7. Economics says:

    For years I have followed the opinionated and regularly flawed economic analysis put forth by the writer. He has routinely held Keynesian theory (stimulus) has proven far superior to trickle down, supply side or Reaganomics which favors lower taxes and less regulation.

    In this article he confuses the government bank bailout known as the Troubled Asset Relieve Program that was implemented under Bush which was credited for stabilizing the US dollar and preventing a global recession.

    He credits Obama with this plan, and although Obama supported it, he was not president yet. Under Obama the trillion dollar “stimulus” was implemented to create jobs (not stabilize the banks) This program was widely criticized and while it did have some affect on unemployment it was not substantial.

    Enter the highly controversial 2016 election in which Trump was elected with his promise to create jobs. His administration implemented the Tax Cut and Jobs bill and rolled back over 35,000 pages of regulation in the federal register. By any economists account the combination worked not just for the rich, but on a percentage basis even more so for the working class. Black, Hispanic, Women, etc saw record low unemployment and by just about every economic data point the “supply side” policies proved without question to have been beneficial.

    Now that the government is implementing a Stimulus that Igwe has years of saying is the only economic theory of merit, he says it won’t work. Of course, he won’t credit the recent supply side success either despite a wealth of data.

    Good sir, it is understandable you dislike the sitting president, but for your own credibility you may wish to consider refraining from commentary in areas in which you have clearly very limited knowledge.

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    • @ ECONOMICS says:


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    • Joseph says:

      Much of the stimulus Trump seeks is directed towards businesses, as opposed to workers. That makes it essentially a Supply side Stimulus.

      How does that approach conflict with the Keynesian Stimulus Approach historically advanced by Dr. Igwe?

      Rather, it suggests a certain consistency on his part.

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