Shutdown: How Covid Shook the World's Economy

by Adam Tooze

With its generous budget deficits, the U.S. pumped demand into the world economy. The overall effect was in sharp contrast to 2008–2009. Then too the government budget deficit had exploded, but under the impact of the financial crisis, both households and businesses had tightened their belts. The private savings rate shot up, and this substantially offset the government deficit. The U.S. current account deficit was cut in half, sucking purchasing power out of world markets. In 2020 too there was a huge surge in household saving, but thanks to the stabilization policies of March, the corporate sectoral balance sheet remained steady and the federal government deficit imparted a giant positive boost. At a time when trade all over the world was imploding, the U.S. current account widened slightly.