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What can economists and doctors learn from each other from the current COVID-19 outbreak?
One of the most important insights that can be drawn from the current crisis is that interest rates should help the economy in precisely the same way antibiotics are used to fight viruses.
Low interest rates and generally loose monetary policy should be reserved for implementation only when the economy is at peril from a recession, which is the case now. Otherwise, they lose their efficiency if used too much when the economy does not really need such support.
Antibiotics have been used previously for the treatment of mild symptoms in cases that do not really require the use of such medication. Moreover, people tend to stop taking their antibiotics when the symptoms of their illness subside. However, that does not mean the virus bacteria in their bodies is really killed.
That is how viruses persist in the body of a host, who thinks he or she is cured of the disease. Meanwhile, the pathogen is allowed to evolve, and bacteria gradually become resistant to our antibiotics, which poses a real threat for future healthcare.
Low interest rates and antibiotics are similar in that economists and doctors have been prescribing them in the past, at times when the situation really did not warrant such drastic measures.
These are the best tools in our arsenal to fight economic crises and health crises. If we continue to use them so carelessly when a severe economic/health crisis does eventually arrive, we will not be able to protect ourselves and our economy.
Hopefully, this will not be the case now, and the extra liquidity in the global economy is going to be enough to offset the economic fallout from COVID-19.
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