With the Covid-19 pandemic intensifying, the US has just adopted a $2tn economic-rescue package (equal to 9.2% of 2019 GDP). The legislation follows unprecedented actions by the US Federal Reserve, which will engage in open-ended quantitative easing, and has introduced new mechanisms to backstop businesses and keep credit flowing.

Much of the US response will come in the form of “helicopter money,” an application of Modern Monetary Theory in which the central bank finances fiscal stimulus by purchasing government debt issued to finance tax cuts or public spending increases. The US economy is deteriorating at a spectacular rate, partly because of the direct health impact of the Covid-19 pandemic, but mostly as a result of social-distancing mandates that are preventing people from producing and consuming.