
Ask HN: Why can't central banks print money as exception? - zxienin
Serious economic fallout of coronavirus is becoming clear [1].<p>Rewind back 3-4 weeks, many governments were hesitant to institute lockdowns, out of concern of economic impact. Some still are.<p>Why can&#x27;t central banks print money as exception? Calm economic concerns down, and let everyone focus decisively on dealing with virus.<p>While I am not an economic and behavioural expert, I am aware of counter arguments to printing money.<p>Yet, these are unprecedented times. The leeway is going to be time limited (say, 6 months). 
Assumption: any downside of limited printing money is far less damaging than global economic engine going in recession.
Not to mention, putting everyone&#x27;s mind at ease, can shape behaviour that can save lives.<p>Pay small businesses, companies that are hit hard with no WFH options and can&#x27;t employ. 
Pay premium to folks on the front lines, critical services.<p>Can ones more educated on economics and behavioral psychology post their answers?<p>[1] https:&#x2F;&#x2F;www.bbc.com&#x2F;news&#x2F;business-51706225
======
op03
They will don't worry about it.

They know whats happening well before people start noticing issues. And you
can bet they have been worrying about the need for bailouts/payouts/credit
lines for a while now.

If I am running a business my bank knows quite well what enters and exits my
account from clients/investors, to suppliers, employees, rent payments etc.
For most businesses this stuff is not drastically changing from month to
month. Its more or less follows predictable patterns. So when there are sudden
disruptions in those flows and major drops in transactions across the board,
like an ant hill that has been stepped on there is a hell of a lot of
excitement and reactions.

But just like the ant hill processes will kick in automatically to restore
normal ops. Businesses will be telling banks what they need short term/long
term. Banks will be telling each other and central banks what their needs are.

Things will be tallied up, including payoffs to whatever section of the
population that is biologically hard coded to take advantage of crisis. This
is how random numbers suddenly start circulating in congress and parliaments
of the world within a few days of the crisis starting.

And then god emperors, prime minsters, presidents, and grandmothers of the
world will show up and say dont worry we will cover all - now get back to
work.

And like the ants we shall.

------
gshdg
Because that’s how you get runaway inflation. Printing money doesn’t add value
to the economy. It spreads the existing value over more currency.

Countries that made this mistake during the Great Depression include Weimar
Germany.

~~~
zxienin
> Because that’s how you get runaway inflation

That's the common view yes. For 6 months? In current context, value is
psychological shoring.

> Countries that made this mistake during the Great Depression include Weimar
> Germany.

How long was printing money period? 1-2 years?

~~~
mtmail
Yes, about 2 year
[https://en.wikipedia.org/wiki/Hyperinflation#Germany_(Weimar...](https://en.wikipedia.org/wiki/Hyperinflation#Germany_\(Weimar_Republic\))

~~~
zxienin
I don't find this Weimar war time hyperinflation comparable to current state.

In opening text, there is the context of keeping this time bound.

Plus globally, there is still economic activity (ones with non human contact).
Even they risk getting hit by cascaded effect, not for lack of demand, but
lack of liquidity in system. This is avoidable.

------
rmrfstar
This is a very deep and important question.

Here's a predictive model for central banks. Their unstated objective is
ensuring that control over resources does not change hands during a crisis. In
practice that means that the relative value of financial assets is roughly
preserved. Check out [1] pdf page 4.

[1]
[https://www.db.com/newsroom_news/GDPBD00000292870.pdf](https://www.db.com/newsroom_news/GDPBD00000292870.pdf)

~~~
zxienin
how does option 1-3, eventually help households, large and small businesses
anyways?

~~~
rmrfstar
An economist might make the following argument. Financial systems are like
banking systems. Banking systems have two equillibria: run / no run [1]. A
bank run can destroy an otherwise healthy bank, and can be a self-fulfilling
prophecy. The way we stopped bank runs in the US in the 1930s is deposit
insurance and the Fed discount window. 1-3 are modern extensions of those
policies. They help households in the sense that they prevent full-scale
depressions.

This argument is actually true imo, but it ignores the fact that the public
could recapitalize the financial system (equity investment) and share in the
upside. When you lend to a company near insolvency, the downside risk is
identical to the downside risk of an equity investment. So, it is strange that
the government favors debt rather than equity. The mental model of "no change
of control" predicts this policy choice and others.

The proceeds of a public equity investment can be distributed pro-rata through
e.g. investments in public health infrastructure or basic scientific research.
Norway's sovereign wealth fund is a good example [2]. This very much resembles
4, although it is not a direct cash payment to households.

[1]
[https://en.wikipedia.org/wiki/Diamond%E2%80%93Dybvig_model](https://en.wikipedia.org/wiki/Diamond%E2%80%93Dybvig_model)
[2] [https://www.cnbc.com/2020/02/27/norway-wealth-fund-
earned-a-...](https://www.cnbc.com/2020/02/27/norway-wealth-fund-earned-a-
record-180-billion-in-2019.html)

------
smarri
I'm no expert. But I'm concerned about quantitative easing. Introduction of
massive amounts of money erodes the value of peoples savings. Propping up
_some_ businesses might not be a good idea, some business should fail if they
are no longer relevant or have not been managed well e.g. a business couldn't
predict coronavirus necessarily, but they could absolutely predict an
unforeseen event that impacts their cashflow for a quarter or more. Also, if
we haven't seen the worst that's to come with the coronavirus, what's the
plan? Throw even more money at the problem? While we are at it, why don't we
just print money forever and pay everyone's salary - where do we draw the
line?

~~~
zxienin
It's ok if implementation of such money printing exercise is more surgical
than broad based. But I don't think this is the time to bring undue complexity
of debating which business model deserves to be propped. This will misdirect
lot of debate/energy.

My view is that tail end concerns here are largely theoretical. we fall in the
trap of such argumentation, when reality needs immediate response.

> if we haven't seen the worst that's to come with the coronavirus

If humanity can't come up with working measure/vaccine in next 1-1.5 yr time
frame, global economy is the least of concern.

> Throw even more money at the problem? While we are at it, why don't we just
> print money forever and pay everyone's salary - where do we draw the line?

This is an unwarranted extrapolation of opening premise. Who argued forever?

~~~
smarri
Thanks, this is worth debating. Is this QE surgical rather than broad based, I
can't see how it's precise and not broad? We can avoid the debate of which
businesses need propped up by not propping any up. Yes an immediate response
is required, but some consideration should be given to down-stream impacts.
Agreed on the vaccine, but the worst to come could happen in the next 1.5
years, and if we've deployed trillions into the economy already, what's our
next move? The extrapolation is my argument, if central banks can print money
and pay wages now, why stop?

------
michaelyoshika
I'm betting on them doing this already. However, what will happen is that most
of these printed money will go to billionaires CEOs. Even worse, we can't
change this because this is how our (US) system works and it's been proven in
the past century that it works better than other systems.

