There's a point where: 1)traditional policy tools are ineffective because as rates get to zero, cutting them doesn't really provide any kind of incentive any mo

There's a point where: 1)traditional policy tools are ineffective because as rates get to zero, cutting them doesn't really provide any kind of incentive any more 2)interventions get more and more extreme and reach the point where they actually can increase panic rather than reduce it It's pretty clear we're well past #1 and could be at #2. The problem that policy-makers are facing here is the real economic impact of this crisis as unknowable but is very likely to be very large. So it's hard to incentivise lending. For example if you're a bank in this environment it's pretty tough to have the courage to go out and lend to small businesses knowing the next few months are going to be brutal for their cashflow. The fed is going to have some difficulty convincing them to lend even in the presence of a zero reserve requirement ratio given that those banks will look at very serious potential writedowns on their loans in any downside scenario.