Coping with an emergency

The panic in the global financial markets has yet to calm down regardless of drastic actions taken by central banks around the world. The Dow Jones index tumbled 12.9 percent on Monday despite the surprise Sunday interest rate cut of a full percentage point from the U.S. Federal Reserve. It was the biggest crash since Black Monday in 1987. The Bank of Korea also carried out its own extraordinary cut of a half percentage point in its base rate to a fresh low of 0.75 percent. The main Kospi, however, finished 2.5 percent lower.

Liquidity pumping is no longer working. The virus has sickened the economy. It first stopped factories and shut down stores. No matter how much capital fuel a central bank injects into the market, the money won’t stimulate demand. It is why stock markets are crashing. Major economies have run out policy means as their interest rates are already at nearly zero.

In a cabinet meeting Tuesday, President Moon Jae-in declared that the country was in a “never-experienced emergency” situation. The government has been taking actions, but their effectiveness has been lacking. Tabletop measures often cannot bring about desired outcomes. For instance, it takes more than two months on average for the government and banks to deliberate on the credit of small- and mid-sized businesses for their new loans in low interest rates.

The government’s idea of issuing 2 trillion won ($1.6 billion) worth of gift vouchers to spend on community marketplaces also will not work since people are being advised to refrain from venturing outside.

Quarantine measures must be the top priority in emergency economic actions. As long as there is a virus scare, the economy cannot recover. Here, speed is key. Merchants, temporary hires and daily workers are having trouble surviving each day. They must receive money immediately.

The government also should pay heed to the pleas from mom-and-pop store owners for a temporary relief from their value-added taxes and four basic insurance coverages for employees. They could be relieved through a monthly fixed cost.

The president said the latest supplementary budget may not be the last. But spending should be wise. The government must be vigilant about the possibility of a lengthy stagnation or even a recession and ensure reserves for a long battle. While expediting immediate funding for those in need, it must save as much unnecessary cost as possible. The first to be trimmed are pork-barrel projects designed to win votes in the April 15 parliamentary elections.