I recommend every one have a look at it over the next couple of weeks. Among other things, a distinguished economic historian who put this horrible event that we are experiencing right now to give us a sense today about what will determine how deep this recession will be, perhaps how long it will last and perhaps what is likely to come and whether the covid19 recession will leave longlasting scars in the global economy. I will turn this right over for penns remarks after which david will pose some questions and then there will be instructions on how the audience members can ask their own questions. Over to you and thank you for doing this. Thank you everyone for joining us this afternoon. In january and february we had a Strong Economy that has happened is the world has been hit by the covid19 virus and exalted is doing great damage but from the economic perspective, the fact that on the essential businesses are being shut down its having an enormous effect on economic activity. People are not shopping, working, going to school. We are going to see the effects of that very soon. You need to keep the data in perspective. If the cpp in the Second Quarter is paying 10 lower than the First Quarter remember we report on an annual basis, so multiply by four. Very possible to see the numbers in the Second Quarter in the magnitude of minus 38 or greater. Likewise, unemployment is harder to measure in the shortterm. Will they be coming back in thee near term to see some dramatic numbers but i dont think that we wont know for a while how serious and how deep the phenomenon is going to be. It isnt a very good comparison. If a response is more like emergency relief than a typical stimulus for antirecessionary response. Now having said that, the factor in terms of how bad this is going to be an muc much inferenl be on the economy, the longer it lasts the more existing businesses will fail financially and close their doors and the longer it lasts people lose their association with their employees and the longer it lasts the more destruction there will be and the harder it will be to come back so its going to be critical. The most important duration is the Public Health response. We wanted to add palliative medicine treatments and test data trace and ultimately be able to few people can go back to work safely. And i think theres still a great deal of questions of how that is going to go. Perhaps as we shut down parts of the economy again, so overall it could be a very bad year for the u. S. Economy. The Public Health response, and our ability to make sure that the hospitals have the apartment thethey needed a scientific establishment is putting all the their resources into addressing this disease will be the important determinant in how the downturn is. Having said all that, there are other components to the respon response. Let me talk briefly about the fiscal response and then spend most of my time on how the Federal Reserve is responding to the crisis. Fiscally, again what we are not really talking here about is the stimulus package because people cant really go out and shop. What we are talking about this emergency relief. What we need to do primarily in the fiscal package is sure that people can survive the period. They can open up again and we can restore economic activity. That would be a big part besides the part of the Fiscal Program that addresses the health needs. The biggest part of the act of the 2. 2 trillion Fiscal Program is to try to just provide life support for an economy that is going to be shut down for a while until we have a better grip on the disease. So, the money is going into direct payments to individuals to help them get through this period. Are they getting money to people fast enough, is it enough . There will probably be more coming later but its the right idea to try to help people get to this period. The other part is to help businesses survive and that involves france for the Airline Industry for example but also credit to help the firms pay their bills and remain solvent so that they can open up again when the Health Situation is better. So i think overall, the response that you think of as an emergency relief package were Disaster Relief has been pretty good. There are some logistical issues in terms of getting the money out, but it has the right shape. I do suspect it will be more coming later as we help the economy get back to full employment and i would also add the circumstances that are appropriate this is why we have the capacity of our own to deal with these kind of crises. Now let me talk in the remaining few minutes about the Federal Reserve which has been extraordinarily active, and i want to commend jake and his colleagues fo were being very proactive in trying to address the concerns in the economy. The fed has done basically three types of things, and each of which has an Important Role in supporting the Financial System and the economy. The first is supporting market functioning and providing liquidity this is what the Central Banks were created for and what was set up for. As we know, theres listening they know that they are dealing with some issues going back into last year where the markets were somewhat destabilized and the fed was putting into the system as early as fall. But since then, with the pressures on the Financial Markets coming from the uncertainty, theres been a lot of destabilization. Its been for example by and large amounts o of tragedies and mortgagebacked securities to help restore quick functioning markets and it continues to put cash into the system to try to make the markets work better. Its opened up its discount window so that the banks can borrow one fort fourth of 1 int as they need liquidity to make loans. Very importantly, the fed is also providing liquidity in the International System so back in 2008 and a financial crisis, one of the problems around the world was that so many Financial Transactions take place in dollars and of course the only source of dollars in the Federal Reserve, so in order to stabilize money markets around the world that conducted swap operations with 14 of the Central Banks meaning we found ways to provide the dollars they could use in their economies to help stabilize their Financial Systems that affected in the Financial Markets. In this instance its also set of agreements with the same 14 Central Banks. So once again the fed will be asking as a letter of last resort in dollars and not just u. S. Banks and Financial Institutions but essentially to the rest of the world. Its also set up in facilities whereby other countries decide they can pledge the treasuries they hold to get the dollars and get cash and again provide liquidity as needed so the fed is acting very aggressively to make sure theres enough cash and liquidity the fed has been aggressive on the monitor policy. They lowered Interest Rates as you know over the summer last year they cut the rates three times and that seemed to be with the doctor ordered so to speak. The risk of recession at the time didnt look like they had achieved a soft landing and now we have a different situation down to the basis points that we saw in the years after the financial crisis. Its issued against saying basically we are going to keep them at zero until its moving back to 2 and i suspect it will be quite a while. Its been at least 500 million or 200 billion in the mortgagebacked securities have already been undertaken. That may be quantitative easing again to keep rates low and the monetary conditions easy after the crisis, the Health Crisis has begun to annoy. So again this is a twostage process at the moment. The financial conditions are helping the system making it easier for disabled for the corporations to borrow but its not really time yet to stimulate spending and get people to go out and buy cars and houses. That will have to wait until the situation is better and at that point it will begin to perform its normal function. Finally and most innovatively its been intervening in the credit markets. The credit markets have been very disruptive by the crisis, by the fact people are so uncertain cash flow implications will be. And so, as the crisis began, many credit markets were disrupted and the fed has borrowed from the playbook from 2008 and added quite a few innovations of its own borrowing from the 2008 playbook, its done three things. First it created a commercial paper facility for the shortterm lending to corporations to help them finance their inventories and materials or working capital. That is something we did in 2008. On the shelf that is up and that is already running. Second, there is a money Market Liquidity Fund that they brought up to allow money markets to sell their securities and reduce pressure on the markets but thet they seem to run the phenomena on a money market mutua money ms and this has been helping them as well. Then the third facility that we have, they are also planning to reintroduce but not yet the socalled term assetbacked security to buy packages of consumer credit, auto loans, Student Loans and a variety of other credit to help make those markets more effect if. So, these announcements together with the treasury, mortgagebacked securities have already improved credit market functioning considerably. Going beyond that, the fed is going to use what we used for the First Time Since the depression of the fed in general has limited ability to buy assets and make loans, but under emergency conditions, socalled unusual conditions and with the permission of the treasury secretary, the fed can eventually landed to anybody in the facility powers and based on that, they are adding a whole number of lending facilities that will try again to ensure that businesses can borrow cheaply and effectively in order to maintain survival in this period. So, what is coming out is the corporate facilities and one that is going to lend directly to corporations essentially making loans for buying bonds and corporations to help them survive the period. There is a secondary facility on assisting the week of existing bonds to improve the markets and then the third, and this is a difficult one, from the past experience the fed is also going to be introducing a socalled business lending program. Main street is a little bit of a misnomer because its really for the middle sized firms funded to 10,000 employees and with the fed would be doing, and we dont know the details yet, they will be asking banks to make the loans to the firms and the fed will be providing cheap vapidity and perhaps providing protection against risks to the banks would be incentivized to make loans on good terms. Now, the smallest institutions, the smallest businesses are eligible for loans from the sba, the Small Business administration. That began this week. Again, the logistics are so important there are some snafus in getting the money helped that i hope will get straightened out. But that is supposed to provide cash to the Small Businesses on favorable terms and in fact those loans are partially forgivable if the Small Companies maintain the payroll. The fed is hoping there as welll and announced i think yesterday that it will buy the loans fairbanks or provide a secondary market for those loans making them more liquid into the banks willing to make those loans. So i guess the thing to emphasize here is that the fed can reinforce the private credit markets. They are dysfunctional because the uncertainty. They can come in and replace those markets to some extent or strengthened markets and bring them back into the markets. The fed doesnt give away money. The 13 trillion requirements that they pay collateral and intended to be repaid. But in order to get into this protection, a big chunk of the money and the Fiscal Program, 465 billion essentially provides equity for the lending programs so that if they do lose money it will be covered by these treasury funds. So, again, there has been progress already and we have seen the credit markets improve. I think the critical issue will be how quickly the Health Situation improves and that will depend on the logistics of distributing equipment and ventilators as well as the scientific effort that we need to get control of this. Finally, let me point out this is a particularly difficult situation because it is a global situation. Almost every country in the world is suffering from this pandemic and almost all have chosen to sit at a reduced economic activity, so this will be a global recession. The situation has been worsened by the strong dollar, i do Commodity Prices, capital flow, outflow from the countries. So, we may see the market crisis and global recession as well as in the united states. So, we have a hard road ahead. But i am pleased overall with the fiscal and monetary responses we have seen. We are going to need more, but at least those authorities have done what they can to help the economies stay functional until the Public Health situation gets better. So, david, i will stop there and be happy to answer any questions. Host great. Thank you very much for that. People listening in, we have a number of questions already but feel free to add to the list by emailing events brookings. Edu. The fed has aggressively increased its Balance Sheet to approaching 6 trillion, so it will be twice what it was when you left in 2014. Is there a limit to how much money the fed can create or reserves they can create to purchase in all of these emergency facilities . Is there some limit to how much the treasury can borrow to finance . There is no limit. At 6 trillion there would be about 30 less than the gdp in japan i dont know the exact number but its the size of the Balance Sheet so it could be bigger. Much of the increase is temporary for example a lot of the commercial paper facility for example, those are shortterm loans and presumably as things normalize they will be paid back and will accordingly shrank that they do have capacity to increase the Balance Sheet if it is willing to do so significantly. I dont think theres any danger in that that inflation will be at risk. If anything, low inflation will be more of a concern. As far as borrowing is concerned, yes the federal government is borrowing a lot again as i mentioned this is when that capacity is so valuable. Paying with taxes would be counterproductive because buying power at the time when the economy needs this buying power the question of sustainability i think is a tough one. I think that the longrun issue clearly as the population ages have received projections of the federal debt that are very disturbing over the next decade or two and we need to think hard about how we are going to get control of that, but in the near term dealing with a crisis of this magnitude i think that this is an appropriate approach and i would note finally Interest Rates being almost zero the burden associated is actually going to be quite low even though the number of dollars but notice i. Host i want to back up to that inflation point because some people look at what is going on with the huge increase in the federal deficit, lowinterest rate, thlowinteresg a lot of reserves. And they think surely this will create the inflation may be more than we want. You dont seem to think that that is the case. How come . If you look at the supply and demand elements of the crisis, on the supplyside, you see for example some types of goods are in short supply in some supply chains are being disrupted. So, there are some supplyside effects that will raise the prices. Overall though, think about whats happening to demand for the Major Industries and what is happening to the demand for Airline Seats or restaurant meals. Because people are staying home and it will be a while before they are back to more normal activity and when they do come back to more normal activity they will have exhausted some of the financial reserves i think spending is going to take a hit so the net effect will be slightly disinflationary. One way to see that is to look at the Commodity Prices for example, which have collapsed. I think overall, the monetary fiscal stimulus will not sufficiently compensate to get us back quickly into a below are slightly above so i think at this point it isnt a highrisk. It depends on the appearance trajectory of the virus and the like. I am not a doctor by any means but they tell us the vaccine is 18 months away and there are things we can do to open up the economy significantly perhaps, but i dont see the economy returning to a more normal state until there is greater confidence both among the average people and at the level of the governors and mayors that opening up the economy will not restart the crisis. So it seems likely that if we could shut off the epidemic of course the economy would bounce back quickly, but it will probably have to restart gradually and it may be subsequent periods of slower activity again. I dont think it is going to be a rapid response. I do want to draw the distinction between this and say a 12 year Great Depression if all goes well in a year or two we should be in a substantially better position and hope that it will be significantly less even than the Great Recession proved to be. Host that raises an interesting question. Th