To analyse the current economy, we need to understand the monetary mechanism

OECD countries are now facing massive monetary creation thanks to central banks' monetisation of government bonds. The supply of central bank money in 2020 will increase by at least 75%, which is enormous in one year. To analyse the economy and financial markets, we therefore have to understand the monetary mechanism, the way in which the balance between the supply and demand for money (from banks and non-bank economic agents) will be achieved after such a sharp increase in the supply of money. Demand for money can be separated into demand for transaction money (related to the value of the demand for goods and services) and demand for investment money (related to the role of money as a component of wealth). If the increase in the supply of money: Is balanced by an increase in the demand for transaction money, goods and services prices will ultimately rise; Is balanced by an increase in the demand for investment money, there is ultimately a decline in long-term interest rates, a rise in share prices and real estate prices, etc., so that the desired amount of money in portfolios increases .