No fall in interest rates to cushion the shock this time around

After the subprime crisis, the sharp fall in interest rates cushioned the shock on economies, in particular by reducing the interest paid by governments, households and companies despite the increase in their debt. But interest rates cannot fall after the coronavirus crisis, yet government and corporate debt ratios will also rise and activity will be permanently depressed. So how can the shock be cushioned? The only remaining possibility is massive use of fiscal policy and debt monetisation by central banks: fully monetised , high and permanent fiscal deficits. Monetary policy will no longer stimulate the economy by driving down interest rates, but by enabling the massive fiscal deficits that are needed, particularly because interest rates can no longer fall.