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Mervyn King

Fiscal Policy During and Beyond the Covid Crisis

This time really is different.

Not a normal recession.

Not a normal recession.

Photographer: Anthony Devlin/Getty Images

The current downturns are unlike any previous recession or depression. The coronavirus itself is novel but, more to the point, so is the reason output collapsed in much of the world — not because of Covid-19 as such, but because people withdrew from normal economic activity, either by government decree or at their own initiative.

In effect, the market economy was suspended. Using conventional economic language to describe such a downturn has bred confusion about how policy should respond.