Why 2020 Was Locked Down and Why the ‘Going Direct Reset’ Debate Is Returning in 2026

A controversial theory about the 2020 pandemic response is gaining renewed attention as investors examine how central banks, governments, and markets could react to the next major economic shock.

The “Going Direct Reset” thesis, promoted by former U.S. housing official and investment banker Catherine Austin Fitts, argues that the crisis marked a turning point in the relationship between monetary policy and financial markets.

Her argument centers on the unprecedented liquidity measures introduced during the pandemic, including the Federal Reserve’s emergency interventions and the broader shift toward direct support of financial markets.

Fitts, a former Assistant Secretary of Housing and Urban Development under President George H.W. Bush, investment banker, and founder of the Solari Report, has spent years arguing that the 2020 crisis represented more than an emergency response to a global health event.

She believes the period accelerated a major change in how governments, central banks, and financial institutions interact during periods of instability.

The “Going Direct Reset” Theory

The theory is linked to a 2019 paper published by the BlackRock Investment Institute titled “Dealing with the Next Downturn.”

The paper examined how policymakers could respond during a severe economic slowdown and discussed greater coordination between fiscal authorities and central banks. It was published before the pandemic and focused on possible responses to future crises.

Fitts has argued that the framework later became relevant when markets were disrupted in 2020.

“The central bankers met in Jackson Hole in summer of 2019, and they reviewed a plan from the BlackRock Investment Institute called the Going Direct Reset,” Fitts said.

The phrase refers to a policy approach where central banks provide liquidity more directly into financial markets rather than relying only on traditional banking channels.

When COVID-19 triggered a global economic shock, the Federal Reserve launched emergency lending programmes and expanded asset purchases. The Fed’s balance sheet increased by trillions of dollars as policymakers attempted to stabilise markets and prevent a deeper recession.

Fitts has said the scale of that intervention would normally have produced a much faster inflation response.

“Normally any injection like that would have extraordinary inflationary impact,” she said. “The reason we won’t feel it right away, as it turns out, was the pandemic.”

The Liquidity Shift After 2020

The pandemic response created one of the largest shifts in financial conditions in modern history.

The Federal Reserve expanded its balance sheet by roughly $3.3 trillion in 2020 while governments introduced large fiscal support programmes to prevent a deeper economic downturn.

At the same time, money velocity, which measures how quickly money moves through the economy, fell sharply.

Supporters of Fitts’ interpretation point to this decline as one reason the liquidity expansion did not immediately translate into higher inflation.

Her view is that lockdown policies changed the balance between large corporations and smaller businesses.

“We basically shut down Main Street, lots of small businesses, left the publicly traded companies open and shifted enormous market shares out of the small businesses into the big businesses,” Fitts said.

Small businesses across the United States experienced significant disruption during the pandemic. Research from government agencies and business groups has linked those losses to a combination of restrictions, changing consumer behaviour, and the wider economic shock.

Critics of Fitts’ interpretation argue that the financial response was an emergency effort designed to prevent economic collapse rather than a planned restructuring of the financial system.

Why Investors Are Revisiting the Pandemic Response

The financial conditions facing markets in 2026 are different from those of 2020, but investors are watching a familiar set of pressures: inflation uncertainty, energy security risks, government debt, and changes in financial technology.

Energy markets remain a major focus as geopolitical tensions continue to affect supply chains and pricing. Higher energy costs can move through the economy, affecting transport, manufacturing, agriculture, and household spending.

The renewed attention around Fitts’ thesis reflects a wider question among investors: when the next major disruption arrives, will policymakers rely on the same tools used after 2020 or introduce new forms of intervention?

Fitts has also pointed to digital financial systems as part of a longer-term transformation in how money functions.

Central banks exploring digital currencies have generally described them as efforts to modernize payment systems, improve settlement efficiency, and expand access to financial services.

The wider discussion has focused on how those systems could affect privacy, banking structures, and the future role of money.

The Policy Signals Markets Are Watching

The importance of the “Going Direct Reset” discussion extends beyond whether Fitts’ interpretation is accepted.

The pandemic response demonstrated how quickly monetary policy can change and how strongly those decisions can influence markets.

For investors, the key questions are practical: where does liquidity flow, which sectors benefit from policy changes, and how do governments respond when the next major shock arrives?

The events of 2020 showed that creating money is only one part of the equation. Where that money moves can shape asset prices, business conditions, and the structure of the economy itself.

The Grey Terminal Note

The 2020 crisis reshaped the relationship between central banks, governments, markets, and businesses. Whether viewed as an emergency intervention or part of a broader financial transition, the period changed how policymakers respond to instability. For investors, the lasting question is not only how much liquidity enters the system, but where it flows and what financial structures emerge around it.