Fed Flails, Markets Don’t Care.

The Fed can’t do much at all when the problems aren’t monetary in nature. A pandemic and its resultant effects are definitionally non-monetary. There has been and will continue to be a real demand shock in the general economy.

This shock will worsen over the next few weeks and months and monetary tools will do very little (though not nothing). Fiscal tools, however, can do something — but some of those tools are more effective than others. Romney’s proposal to give every person $1,000 a month until the crisis abates would be a very good one to enact immediately, for instance.

Monetary tools can only fight monetary crises. That’s not what’s happening now.