Pursued Economy

CHAPTER 6Monetary Policy during the Pandemic and the Quantitative Easing (QE) Trap

The COVID-19 pandemic recession, which struck in early 2020, threw the global economy from Case 3 into Case 2, forcing governments and central banks to make a dramatic policy shift to deal with the life-threatening economic downturn. The subsequent recovery then pushed prices sharply higher because of both supply-side disruptions and Sustainable-Driven Goals (SDGs)-driven higher energy prices, fueling strong inflationary concerns. Those concerns were augmented even further by the Russian invasion of Ukraine in 2022.

When the pandemic hit, people had to stay home to avoid being infected, and millions if not billions of households and businesses suddenly found themselves with drastically reduced incomes. The gross domestic product (GDP) in most countries contracted precipitously as lockdowns, voluntary or otherwise, were implemented. In the second quarter of 2020, the GDP shrank by as much as 8.94 percent in the United States, 11.63 percent in the Eurozone, and 7.95 percent in Japan—the worst figures seen since the Great Depression in the 1930s. The United States, for example, went in just two months from reporting its lowest unemployment rate in 50 years to its highest in 90 years. Only Taiwan, which was the first country to report the existence of the new virus to the World Health Organization (WHO), managed to contain infections from the start of the pandemic and was thereby able to maintain ...