While the rate of inflation has been falling at a consistent rate, the budgets and bank accounts of America have already taken a beating after around a couple of years of rising prices. So, would a stimulus check payment help the situation? The experts believe that a recession could spell disaster for the entire economy.
There were already three separate rounds of stimulus check payments that helped the country stay abreast of its earlier crisis. Now, while there is a slight chance that it could, in fact, deal with the recession- that is not the most dangerous threat for the country. Also, most of the citizens would be glad to receive the extra cash- but the long-term risks aren’t worth it.
Stimulus Check Payments Might Not Be The Answer To Recession
As it stands, the Federal Reserve can’t force any of the banks to start loaning money at a certain rate. Rather, they usually manipulate the cost of borrowing by adjusting the rate of discount that it charges banks for short-term loans. From the 16th of March, the Federal Reserve enacted the first of what later turned out to be 10 consecutive increases to the short-term rate, which further spurred the national and private banks to increase the cost of loans to a high of 16 years. This is one such strategy that Paul Volcker, the Fed Chairman, had successfully pioneered and implemented during the crisis that took place in the late 1970s and 80s.
Interestingly, Congress would be able to authorize any form of stimulus check payments even if the Fed didn’t like it. But it would be hard to imagine the legislators injecting hundreds of billions of dollars into the economy when the Reserve has already dedicated a year to a painful strategy.