The COVID recovery was working.

Demand was surging. Employment was climbing. Real wages were moving for the first time in a generation. The fiscal engine was actually running.

Then came the inflation bursts. The Fed raised rates. And the fiscal hawks found their voice. And the sweet music stopped.

But here’s the question nobody asked: was the inflation telling us we’d hit a real resource constraint — or was it telling us that large firms had spotted a coordination window and were running prices up while they could?

Isabella Weber and her colleagues have now documented the answer. It was the latter. Economy-wide cost shocks — pandemic supply disruptions, energy price spikes — gave price-making firms cover to hike simultaneously without fear of losing market share. The inflation was sellers’ inflation. Markup extraction dressed up as supply pressure.

Which means the Fed raised rates to suppress something it couldn’t fix with rates. And the fiscal engine was throttled back precisely when it should have kept running.

Now imagine Abba Lerner had gotten his way.

Lerner’s MAP — the Market Anti-inflation Plan — is essentially a cap-and-trade system for markup dollars. Firms that want to raise prices must purchase warrants in an open market. Firms that cut prices generate warrants they can sell. The warrant authority controls the total stock. The market price of warrants does the rationing — no bureaucratic price controls, no individual firm constrained from raising prices, just an aggregate cap enforced by the warrant price itself.

Had such a system been operational in 2020, here is what would have happened differently.

As the recovery heated up and firms began their coordinated markup expansion, warrant prices would have risen sharply — a real-time signal that aggregate markup pressure was building. The fiscal authority would have seen it instantly. And instead of reading the CPI and panicking, they would have known: this is extraction, not scarcity. Tighten the warrant stock slightly, let the market price discipline the coordination, keep the fiscal engine running.

The recovery could have plowed ahead. Month after month, quarter after quarter, injecting demand, pulling workers back into employment, tightening the labor market — until we hit the actual Beveridge frontier. Not the fake frontier conjured by a markup surge, but the real one: genuine scarcity of available labor hours.

We left millions of working hours on the table because we had no instrument capable of distinguishing sellers’ inflation from real resource constraint. The warrant market is that instrument. It would have told us the difference. In real time.

What happens once you actually reach the Beveridge frontier — when the vacancy rate and the unemployment rate are genuinely tight — is a different and fascinating question. Other innovations must bloom. That is for a later installment.

For now: note that we had the demand. We had the fiscal will, briefly. We had the labor available. What we lacked was the price architecture that would have let us use all three simultaneously without triggering a markup panic.

Lerner designed that architecture fifty years ago. We didn’t build it.

We paid for the omission.

COVID killed a million Americans.

And, accidentally— by panicking the FIRE lords— showed us exactly how a macro recovery could be run.

We should not waste the lesson.

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The Accidental Vickrey

William Vickrey died trying to tell us something simple: a sovereign government that issues its own currency has no excuse for tolerating mass unemployment. None. The constraint is not financial. It is a political spook.

A plague arrives and blows the imaginative constraint to pieces.

In six weeks in the spring of 2020, Congress moved five trillion dollars. Direct payments landed in household accounts. Eviction moratoriums froze the foreclosure machine. Student loan clocks stopped. The Fed opened facilities that bypassed the private banking system entirely. None of this was theoretically impossible. It was politically impossible. Then it wasn’t.

Vickrey, our hero, died the day after winning the Nobel Prize in 1996 and never lived to see his vindication in 2020.

Proof of Concept

The money went out — demand injection without intermediary, without means-test delay, without a private bank skimming the passage. Household balance sheets stabilized. The feared depression did not arrive.

Private debt overhang is a demand killer. Vickrey knew this. The pandemic response suspended debt service for millions of households and proved that the financial system did not collapse as a result. It accommodated. It always could have.

Alas, there was no Act II.

If Act I is adequate demand injection, Act II must be markup discipline. Without it you get exactly what happened next: accelerating inflation, which then became the political weapon used to discredit the entire program.

The Political Case

Wall Street’s two-headed Congress did five trillion dollars in six weeks.

They did it because they were terrified. We can do it because we choose to.

The COVID response proves the financial constraint is not real. What remains is the political constraint. A presidential candidate who has absorbed this lesson — who can point to the plague and say: we know how to do this, we just need to do it without a million people dying first — has an argument that did not exist before 2020.

Vickrey’s ghost is waiting.

Gargo is the founding theorist of the Market Earth Institute.