Will there be a post-crisis or a post-war economy after the coronavirus crisis?
If the coronavirus crisis is quite short and does not lead to massive bankruptcies or a considerable rise in public debt, we will then be in a post-crisis economy where: Public debt can be financed in financial markets with the help of the central bank, and fiscal deficits are normalise d in a few years; It is sufficient to provide banks with liquidity and the economy’s financing needs are covered; Most companies can resume normal activity and invest, possibly with government help (tax cuts, investment incentives); Financial markets recover rapidly; There is additional, but moderate inflation; Normal incentives make it possible to implement the necessary industrial and strategic sector development policy. But if the coronavirus crisis is long and lasts for many quarters, then there will be many bankruptcies and a huge increase in public debt and we would be in a post-war economy where: A sharp increase in the tax burden and a significant inflation tax are needed to reduce the public debt: inflation is a result of shortages for a number of goods; Bankruptcies lead to multiple nationalisations and to such a marked deterioration in the banks’ situation that they also have to be nationalised; Due to massive nationalisations, there are practically no longer any equity markets; Significant government control in the conduct of industrial policy and in choices and financing of investments appears.