4 ms·

What happens if/when the lender of last resort (i.e. central banks) goes down?

raducu 6y ago
A Central Bank cannot go down, as long as its on good terms with the FED or ECB.
dredmorbius 6y ago
What happens if the scorekeepers run out of numbers? Central banks are the originators of money, itself a socially and legally recognised measure and transactor of debts. There is no resource constraint on supply. Trust may fall, inflation may occur, there may be too much money chasing too few goods and services. But it's largely axiomatic that a central bank cannot run out of money. Regionally, some preferred currency may emerge, but given that a pandemic is literally everywhere, there are no regional banks which are entirely unaffected by the situation. (Some may be to a greater or lesser extent, and regional trust shifts might occur.) But addressing your hypothetical; that's definitionally impossible: A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a state or formal monetary union,[1] and oversees their commercial banking system. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the monetary base in a financial crisis. https://en.wikipedia.org/wiki/Central_bank https://en.wikipedia.org/wiki/Central_bank
- jonathanliu 6y ago
  I'm aware, perhaps I should've been more clear. By "go down", I meant a loss of confidence in the nation's currency/debt.
  - lmm 6y ago
    We'll see some inflation. Savers will be worse off in real terms; retired people will have a worse time of things over the next few decades. But it's hard to imagine it getting completely out of control: there's no alternative, and no actual shortage of real goods, unless the pandemic reaches the point where it's actually limiting production of things like food, clothing and so on.
Bombthecat 6y ago
They wont go down. Everyone and his dogs know that things need to keep running until the pandemic finds an end. When the end comes (for example a vaccine) yes, than things can get worse. And i suspect America will be hit really hard. Why? All those small businesses will be gone. Germany: the healthy ones will just reopen there doors.

A Central Bank cannot go down, as long as its on good terms with the FED or ECB.

What happens if the scorekeepers run out of numbers? Central banks are the originators of money, itself a socially and legally recognised measure and transactor of debts. There is no resource constraint on supply. Trust may fall, inflation may occur, there may be too much money chasing too few goods and services. But it's largely axiomatic that a central bank cannot run out of money. Regionally, some preferred currency may emerge, but given that a pandemic is literally everywhere, there are no regional banks which are entirely unaffected by the situation. (Some may be to a greater or lesser extent, and regional trust shifts might occur.) But addressing your hypothetical; that's definitionally impossible: A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a state or formal monetary union,[1] and oversees their commercial banking system. In contrast to a commercial bank, a central bank possesses a monopoly on increasing the monetary base in a financial crisis. https://en.wikipedia.org/wiki/Central_bank https://en.wikipedia.org/wiki/Central_bank

jonathanliu 6y ago
I'm aware, perhaps I should've been more clear. By "go down", I meant a loss of confidence in the nation's currency/debt.
- lmm 6y ago
  We'll see some inflation. Savers will be worse off in real terms; retired people will have a worse time of things over the next few decades. But it's hard to imagine it getting completely out of control: there's no alternative, and no actual shortage of real goods, unless the pandemic reaches the point where it's actually limiting production of things like food, clothing and so on.

Bombthecat 6y ago

They wont go down. Everyone and his dogs know that things need to keep running until the pandemic finds an end. When the end comes (for example a vaccine) yes, than things can get worse. And i suspect America will be hit really hard. Why? All those small businesses will be gone. Germany: the healthy ones will just reopen there doors.