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This is effectively how you print money in a modern economy. They're giving banks access to a lot more cash and have reduced reserve requirements to 0%, meaning
by sarah180 7y ago
This is effectively how you print money in a modern economy. They're giving banks access to a lot more cash and have reduced reserve requirements to 0%, meaning that banks can loan new money without limitation and without fear that they'll be able to borrow to cover those loans.
Most money is not actually on paper, so the amount you print is not the point.
- coretx 7y agoYou can only benefit / capitalize on the decreased interest if you are in possession of capital already.
- sfj 7y agoBut who are they going to lend to? Aren't most companies losing cashflow due to loss of employees/supply, and don't have demand due to everyone staying home? The only companies that are going to be borrowing are those that are out of money and need to try and weather the current crisis. If the banks make a mistake here and the companies they lend to go bankrupt, they go bankrupt too.