Monetary Matters with Jack Farley
The Fed and The Flu | David Kotok on How Pandemics Transform Economies and Markets
May 16, 2025
David Kotok, Co-Founder & Strategic Advisor at Cumberland Advisors, dives into the economic twists brought about by pandemics, particularly through insights from his book, "The Fed and the Flu." He discusses how historical pandemics have consistently lowered natural interest rates and exacerbated inequality. Kotok also critiques the U.S. response to COVID-19, emphasizing the need for better preparedness. With a focus on historical data over centuries, he illustrates the interconnectedness of health crises and economic shifts.
01:04:57
Episode guests
AI Summary
AI Chapters
Episode notes
Podcast summary created with Snipd AI
Quick takeaways
- Pandemics typically cause a decline in natural real interest rates while leading to increased productivity and wealth inequality.
- Different governmental responses to health crises significantly shape economic outcomes, highlighting the need for coordinated action in future pandemics.
Deep dives
Pandemics and Neutral Interest Rates
Pandemics significantly impact neutral interest rates, typically leading to a decline in these rates in the medium term. A study spanning 800 years of history found that following pandemic shocks, the neutral interest rate decreases, as the capital is preserved while the population may diminish. This phenomenon occurs because the wealth becomes increasingly concentrated among the affluent, who continue to save and invest, thereby driving down interest rates. The resulting economic disparities and productivity shifts highlight how wealth distribution can influence broader economic indicators.
