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St. Louis Federal Reserve President James Bullard said today that argues that a potential $2.5 trillion hit coming to the economy is both necessary and manageable if officials move fast and keep it simple, according to a Reuters report.

It may seem an unconventional view in a moment of global anxiety, but Bullard argues the shutdown measures now being rolled out are essential to shortening the course of the pandemic. They must also be coupled with massive federal government support to sustain the population through its coming isolation and prime the economy to pick up where it left off.

To Bullard that means:

  • Match any lost wages.
  • Match any lost business.
  • No questions asked.
  • No arguments about bailouts or “moral hazard” – the sticky issue of publicly funded rescues of bad actors.

And, above all, when the losses are tallied, don’t call it a recession.

Recessions are the ordinary – even predictable – contractions in activity that mark the end of normal business cycles. Bullard, who has earned a reputation inside the Fed for a penchant to rethink problems and reframe debates, said this is anything but.

“Frame this as a massive investment in U.S. public health,” Bullard said in a Friday telephone interview.

key comments

  • Bullard says massive drop in output, rise in joblessness from coronavirus should be matched dollar for dollar, with federal government borrowing as needed.
  • Says full offset of wages, earnings would set stage for rapid rebound.
  • Says sharp economic contraction in second quarter should be seen as investment in public health.
  • Says unemployment even as high as 30% should be seen as a success and sign people are staying home.
  • Says Fed willing to do more to assist with crisis.