The role of central banks and governments in a crisis: Taking the risks that savers and investors no longer want to take

Since the start of the coronavirus crisis, OECD governments have introduced public guarantees for loans; central banks have been buying government bonds and corporate bonds, including poor-quality bonds. It is important to understand that there is no savings shortfall . O n the contrary, households cannot consume because of the shutdown of production and the lockdowns, giving rise to considerable involuntary (forced) savings. So what we are seeing is a transfer of risk. The crisis has driven up risk aversion among savers and banks. Without intervention, there would a rationing of lending to the most vulnerable countries and to companies. The intervention of governments and central banks therefore consists in placing on their balance sheets the risks that banks, savers and investors no longer want to have on their balance sheets. Governments and central banks are therefore playing the role of insurer, which ought to increase uncertainty about the future state of public finances (central banks pay their profits to the government).