A new report was presented at a conference of global central bankers last week in New York that has multiple authors including several of the top economists. 

The report advocates that central banks act early and aggressively when confronting a downturn. These crisis-era stimulus tools follow monetary policy. That is to say, the Fed, or any central bank tries to create stimulus in the economy by making money less expensive to borrow. We’re talking printing money, negative interest rates and forward guidance telling the markets that money will remain cheap.

The idea is that if money is cheap, borrowers will use it to expand production, to hire people, and to make investments in growth of the business. On the consumer side, low interest rates make it attractive for consumers to buy now using credit instead of saving up the money to buy things when they can truly afford them.

Today we are facing a crisis caused by the corona virus outbreak. If the impact is prolonged and travel becomes severely curtailed, we could start to see airline bankruptcies, hotel bankruptcies, and tour operators going out of business.

We are seeing supply chain disruptions where the impact is not even fully understood. How this will ultimately impact businesses remains to be seen. We are already seeing companies unable to ship products because of component shortages.

Making money cheaper to borrow won’t help.

Federal Reserve Chairman Jerome Powell said recently that the Fed will fight the next recession aggressively with quantitative easing. That’s code for printing money.

What will be needed in this instance is fiscal stimulus. But not just any form of fiscal stimulus. Typically when governments try to stimulate the economy they get busy building roads and bridges. That too would be completely useless as a remedy to today’s economic slowdown.

Now is where government needs to step in and say to businesses affected by the corona virus outbreak, “here’s how government is going to help you directly”. So far none of the affected countries are making any meaningful statements about how they intend to protect their citizens from economic harm caused by the outbreak.

Monetary stimulus will do nothing. It will require fiscal stimulus in the form of low interest loans or outright grants to affected businesses.

Governments are way behind the curve in taking steps to contain the outbreak of the virus and they’re also way behind the curve in taking steps to protect the economy.

So what’s the message in all this? Make sure you have taken the necessary steps to conserve cash in your business, take a defensive posture and be ready to rescue troubled assets when the time comes.