The fiscal and monetary stimulus announced by the world’s major economies over the past month is a global policy event without precedent in peacetime. 

The increase in fiscal spending and loans in the US this year alone will reach more than 10 per cent of gross domestic product, larger than the rise in the federal deficit through 2008 and 2009. Although this is probably not as big as the financial stimulus implemented by China after the financial crash 12 years ago, most big economies could see government debt to GDP ratios rising by 10-20 percentage points.

The impact of central bank injections will be equally enormous. For example, the US Federal Reserve may finance part of the country’s fiscal stimulus by buying Treasuries. On top of that, its balance sheet will grow from purchases of mortgage bonds and packages of private loan assets. It would not be surprising if the Fed’s balance sheet increased by $2tn-$3tn this year, up from $4.2tn at the end of 2019.