As a novel virus threatens to curb global population growth, the principles of traditional economics are being re-written.

While central banks and governments (and yes that independence has been whittled down to rice-paper thin Chinese walls) play push and pull with money supply, one is forced to try and find a meaning in their actions.

But before we do, a reminder of things:

• Governments are by the people for the people and therefore the people’s (except everywhere!), and
• Money supply is there to be managed so that the people don’t end up with hyper-inflated low value currencies, and
• Negative interest rates never happen because…, well just because but they did, and
• Governments can’t borrow for free – unless they have hit the end of the road of the economic model assumptions or unless they are bankrupt, and
• Poorer nations pay high interest – as long as the interests of wealthier nations are protected, and
• The pandemic has had many permanent effects in economies all over the world.

What then is expectation of their actions?
It really depends on what side of the poverty spectrum your economy is residing. For the richer nations, it is to avert a credit crunch unlike we have ever seen by pumping huge amounts of cheap liquidity into the financial system. The “let’s buy ourselves time” strategy is worth a try, and it may or may not work. It has lifted financial asset prices, when increasing production matters more. But managing output has been further complicated by the highly uncertain environment and the fact that demand has taken a severe knock. Distribution of printed monies to the people has been made much less taboo – often correctly so given the scale of the ongoing crisis, but this is not a viable option for all nor can it be implemented without limits. QE in the US, Europe and Japan (longer-lasting) never caused any inflation after the GFC, some dissidents can argue, but a look at the much faster growth in money supply across the world is instructive. Money supply is accelerating this time around yet production growth is negative and will take a long time to heal completely. Growth in money supply being far ahead of production provides the finest cocktail for inflation. For now, “whatever it takes” or “whatever is possible” is the line of thinking in the buildings of authorities everywhere, but when inflation comes it would not have come unannounced and it will be too late to put under control.