As long as uncertainty and risk aversion are very high, there is no downside to massive money creation that offsets the loss in the level of GDP

In OECD countries, and particularly in Europe, the COVID crisis is causing a sharp fall in the GDP level, which will continue in 2021 with the second wave of the pandemic. As governments and central banks do not want the fall in the GDP level to lead to bankruptcies, unemployment or a loss of purchasing power for households and companies, this fall in the GDP level has been offset by a massive fiscal deficit monetised by central banks, i.e. by helicopter money, which prevents a fall in household disposable income and in corporate earnings. This policy will be continued in 2021, more than expected. As long as risk aversion and uncertainty are very high, this money creation (money is de facto distributed to households and companies) has no negative effect, since demand for money has increased in parallel , and economic agents have agreed to keep this additional money in the form of money holdings . But when uncertainty and risk aversion decline (which may be drastic once a vaccine against COVID is found), the money supply will not decline, and the dangers of money creation will then emerge: Perhaps inflation in goods and services prices, which cannot be ruled out if the money held is consumed or invested; More probably inflation in asset prices and bubbles if the money held is reinvested in other asset classes. Currently, we can have the illusion that the extent to which the loss in the level of GDP can be offset by money creation is unlimited . This illusion will disappear when risk aversion and uncertainty decline.