Chapter 11 bankruptcy may be many firms’ best hope for surviving the present crisis. But to take advantage of it, they need credit—the cheaper the better. Firms can get cheap credit through either the Small Business Administration’s (SBA’s) Paycheck Protection Plan or the Fed’s Main Street Lending Programs. But there’s a catch: to qualify for these loans, they mustn’t file for Chapter 11.
The Fed’s current business lending plan is actually its second try at business lending. Alas, the first attempt went badly, and a look at what went wrong suggests that history may soon be repeating itself.
Had I had 1500 words rather than 1500 characters to play with, I would have argued for keeping the Fed out of the non‐bank lending business altogether, so as to not involve it in politically‐charged decisions regarding which businesses get thrown a lifeline, and which ones are left to drown.
They say that a bad penny always turns up. But when it comes to crises these days, it seems that what keeps turning up is a bad idea—namely, the idea of having the U.S. Mint strike one or more trillion‐dollar platinum coins.
Predictably, the depths of the present economic crisis, including the remarkable flattening of interest rates since it began, have led to several calls by economists for the Fed and other central banks to ready their money choppers for a major money‐financed spending‐spree.
I believe that it’s as important as ever for the Fed and Congress to stick to their respective fiscal and monetary turfs, and that if there’s any reason why they can’t do so, while taking all necessary steps to address the crisis, it’s that Congress refuses to take responsibility for any potentially risky operations it would rather have the Fed undertake.
Market Monetarism is more consistent with both old‐fashioned Monetarism and Austrian economics than Murphy allows, and that, to the extent that it differs from versions of either, it does so in ways that improve upon them.