When the COVID event began last year, the magnitude of the economic and financial disruptions was staggering. Voluntary and mandated quarantines, lockdowns, and social distancing efforts hammered aggregate demand, caused unfathomably large job losses clustered in certain service sectors, and sharply increased uncertainty. Workplaces closed, travel was curtailed, and global supply chains were disrupted.
Large sectors of the global economy, such as tourism and transportation, came to an abrupt stop. As concerns about the virus and measures to contain it spread, these effects grew. At the same time, certain critical financial markets seized up or ceased to function effectively. Short-term liquidity markets were strained as investors “dashed for cash,” focusing on their own liquidity.