Are governments acting illegally as they print ever greater sums of cash?

Helicopter economics – giving money to citizens proposed by Milton Friedman the economist who advised Reagan and Thatcher. It was also seen as a way by Ben Bernanke to kick start the Japanese economy in the 1990s

However, most governments in an effort to stimulate their economies and keep business alive are encouraging them to borrow yet more  and more money and add to an already a massive mountain of debt globally

However, ‘Monetary financing’ is illegal i.e. when a central bank creates money to buy government bonds enabling the government to in effect spend without limits. In 2014 it  was prohibited for the ECB to do this, indeed its QE programme has already been questioned by the German constitutional court

A member of the BoE’s monetary policy committee, which sets interest rates recently said “If we were the central bank of the Weimar Republic or Zimbabwe, the mechanical transactions on our balance sheet would be similar to what is actually happening in the UK right now. That is not where you would find the smoking gun,”  Because the B of E is independent of the Government, so technically it is not ‘Monetary Financing’ – even though it may look, swim and quack like a duck!!!

Only 41% of Americans have emergency savings of $1,000 or more

33% of Brits have savings of less than £1,500

There are only 15 companies in the S&P 500 that are net cash positive

In Q1 2019 bankruptcies were highest in 5 years

Chapter 11 bankruptcies could triple in the USA based on what happened in 2008

Most governments were not prepared for covid-19 and in a desperate effort to save lives have locked down their economies and turned on the printing presses. The potential ensuing recession could tip many companies in to bankruptcy

James Mather, barrister specialising in insolvency, fraud and company litigation “once the lockdown ends, huge numbers of businesses will survey the scene and find that, despite government assistance, they have accumulated hopelessly unpayable debts”.

Be interesting to see if anyone does indeed challenge a government or bank for their activities!

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