The boundaries between monetary and fiscal policies are fading .
Policymakers are blurring the lines between borrowing the money they need and simply finding that money, as they have to record record spending resulting from the threat of another Great Depression .
Most modern economies have attempted to keep the two activities as separate as possible, but the typical setting for elected politicians was to take charge of budgets and meet any deficit by borrowing in bond markets, while the cash printing machine was separate in another branch of government, the central bank .
But these breaks began to appear as full of holes after the global financial crisis in 2008 , and then they all disappeared during the recession resulting from the outbreak of the new Corona virus .
According to news agency ” Bloomberg ” , public spending is the only thing that keeps the survival of millions of households and businesses, in the cause of the epidemic in the closure of the entire high unemployment industries, and the suffering of the responsible governments for relief efforts of the largest budget deficit in history . They pay at least some of the bills through what are considered effective loans from their central banks, which are debt that can be transferred indefinitely, and are actually considered like money .
In the United States, the Federal Reserve is to buy $ 3.5 trillion of bonds this year – according to Bloomberg Economics’s estimates – most of which will be Treasury bonds, which cover a good portion of the fiscal deficit forecast of at least $ 3.7 trillion .
No one knows exactly when the debt will shift from the balance sheet to the hands of private sector investors, if that happens. There are similar stories in developed economies from Europe to Japan, and even in some emerging markets, with Indonesia and Poland joining the battlefield .
The fear of inflation lies behind the long-term prohibition of what is known as “ debt liquidation ” , especially since history is eventful when politicians put their control on the printing presses and put a lot of money in all aspects of the economy, causing prices to spiral out of control and erode the true value of all kinds of savings. , From bank accounts to the bond portfolio .
According to ” Bloomberg ” , the central banks separated from the rest of the government in order to apply controls when politicians beyond their borders .
Economist Paul McCauley, former chief economist said at the company , ” Pacific Investment Management PIMCO ” , who helped guide the company ” and coined terms such as ” shadow banks ” and ” moment Minsky ” , if it is likely to require this autonomy once again the same day .
During the epidemic, economists argue that the threat comes from the opposite direction, as deflation poses a greater risk. In slow-growing developed countries, politics actually tends to this method for years, and therefore the challenge has been to stimulate economies, not calm them .
When the space available to policymakers to do so by lowering interest rates, they experimented with other methods, and the effect gradually undermined the traditional separation of monetary and fiscal policies .
Given the past, it is difficult to determine whether this threshold has been exceeded or when it has already been exceeded .
After the collapse of 2008 , the whole world witnessed a recurrence of controversy, as more countries gathered a greater budget deficit with so-called quantitative easing. The Federal Reserve bought Treasury bonds in the open market through a select list of traders, and other central banks made similar arrangements But there are many more policies taken in light of the current crisis .
Yale University’s senior lecturer, Stephen Roach, believes that there was no real alternative, as the economy fell into the biggest dilemma he had ever seen, and therefore there was a need for massive financial incentives that the central bank should finance .
He said the former president of the non – executive ” Morgan Stanley ” in Asia, Roach, that this does not indicate a lack of consequences .
He added that the value of spending supported by the US Federal Reserve means that inflation may start to rise after the outbreak of the epidemic with the virus, pointing out that bond holders are always punished in the period of high inflation .
It has been decades since the developed economies tolerated anything of this kind remotely, as inflation remained weak or non-existent at all, despite the borrowing of many governments or the lending of central bankers .
The effects of his long absence, calls to rid economies of the downturn caused by the virus, even if this means more blurring of the lines between debt and money .
In the European Union, for example, veteran investor George Soros suggested that member states join forces to issue ” permanent bonds ” that should not be paid at all, with coupons paid by 0.5% or so, and if that coupon reduced by half a percentage point – according to the chief official investment in ” AXA Anafistmant Mangirz ” Alessandro Tantore – will stock a cash basis, there will be a difference between the amount of permanent bonds 0% and currency .
She explained , ” Bloomberg ” , the instrument of coins – Platinum’s worth a trillion dollars for each of them – is what to do with the US Treasury Department under the draft law presented by Naibtan rational Tolib and Ilhan Omar, which they thought that this procedure will be financed checks stimulus for families without making any addition national debt and raise A struggle over payment in the future .
The portfolio manager believes the company ” PIMCO ” , Nicolas Mai, governments and central banks may stop converting public debt explicitly to the funds, as the risks to monetary stability outweigh any benefits .