facebookSam, what do think the unintended consequences of instating stimulus packages designed to offset COVID-19-related economic disruption might be? - Seedly

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Zac M

01 Sep 2020

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SeedlyAMA

Sam, what do think the unintended consequences of instating stimulus packages designed to offset COVID-19-related economic disruption might be?

AMA Endowus

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Samuel Rhee

01 Sep 2020

Chief Investment Officer at Endowus

Hi Zac, sorry for the late response - there was overwhelming number of questions and still getting to answering all of them. But thank you for your question and your patience. Its a great question and as a macro buff right up my alley. The unprecedented level of monetary and fiscal stimulus across the globe was instituted precisely to offset the sudden drop in demand from the unprecedented nature of the economic shock that COVID-19 has brought. The unique circumstances we were in is what resulted in the governments and central banks to respond in this unprecendeted way. Unprecedented in scale, concerted global effort and the fact that both monetry, fiscal policy tools - and all of it that we can use - were thrown at it. I think largely it was necessary and has done its job. There are a lot of intended and unintended consequences to these policies. But much more intended and few unintended for now. it is supposed to be inflationary and boost demand but also liquidity and financial markets and they clearly know that there is a high probability that asset prices will also be inflated back. The stock market's rise is precisely what the Fed and the US government in an election year would like to be doing well. So I think they are very aware of these consequences as loose monetary policy and printing money has always led to asset price inflation in 1930s and also since the global financial crisis. This year is no different.

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