The scenario we have here as I see it , and I am no expert at all, is really like a scenario of a war, where there is a massive jolt to the real economy. We have a force majeure catastrophe event, which will cause huge unemployment, but only for say a number of months until the virus has run its course.
We will see both supply shortages and demand shortages and Depending on the government policies, we'll see if inflation or deflation results.
I don't see any possibility at all of hyperinflation in any modern diversified economies, assuming that these countries realise the seriousness of the situation and engage in the right policies!. The MMT LITERATURE explains at length the causes of hyperinflation with many examples eg Weimar, Zimbabwe, Venezuela etc, I am not an MMT expert though so I may be wrong!
If governments do not bail out the ordinary people, then we could end up with masses of unemployed bankrupts and massive demand shortages causing deflation.
If governments do not bail out the corporates who are now running out of cash and being downgraded, we could face supply shortages and inflation, but my gut feel is that we have plenty of excess capacity mostly that can be brought in line to fill in supply shortages.
Last edited by Randor
on March 23rd, 2020, 10:42 pm, edited 1 time in total.