“Bad money” that will not go towards financing productive investments?

The Federal Reserve and the ECB have launched massive quantitative easing programmes to support the economy during the coronavirus crisis. First, it is important to understand that there is not a shortfall of savings to finance the fiscal deficits, as the private sector is generating large involuntary or forced savings. The central banks’ action aims to finance governments and companies because the private sector would not do so spontaneously. Instead , it would use its savings for example to hold money. The ultimate aim is to prevent corporate bankruptcies and a fall in household incomes. This has given rise to criticism that this mone y creation is creating “bad money”, since it is not going to wards financing capital accumulation. This criticism is over the top : Preventing corporate bankruptcies prevents capital from being destroyed; Preventing a fall in household incomes prevents a rise in defaults on household loans, a banking crisis and the resultant inability to finance investments. It has been suggested that governments should go further by targeting this money creation in such a way that avoids bolstering the capital of polluting and CO 2 -emitting industries. But they cannot take the risk of these companies going bankrupt.