That's the question posed by a writer for the British newspaper, The Guardian.
Here's an excerpt from a June 17 article:
Life used to be so easy for central banks. A tweak here and a tweak there was all it took to keep inflation under control. Now they are creating money in unprecedented amounts and contemplating negative interest with only the sketchiest idea of how things will pan out. It is much more complex and much more dangerous, not least for central banks themselves.
The problem is that lockdown is affecting both parts of the economy. Keeping people at home and restricting their movement reduces the supply of goods and services, which would normally mean upward pressure on the cost of living.
Yet, lockdown is also reducing demand, because some workers are being laid off and others are getting less from government wage subsidy schemes than if they had been doing their jobs. Weaker demand normally pushes inflation down.
The challenge for central banks is to assess these two forces and work out what to do using their two main policy tools -- interest rates and the buying, or selling, of bonds.
So far, the evidence is that central banks see lower inflation as the more immediate threat. The US Federal Reserve, the European Central Bank and the Bank of England have all massively increased their quantitative easing programmes, in effect printing money by buying government and corporate bonds...
[C]entral banks fear a colossal depression and deflation today far more than rapidly rising inflation tomorrow. That is the right approach but it is still fraught with substantial risk.
Yet, one of the messages of Robert Prechter's 2020 edition of Conquer the Crash is that central banks cannot stop deflation.
The following excerpt from the book addresses the idea of printing money as a way of preventing deflation:
Countless people say that deflation is impossible because the Fed can just print money to stave off deflation. If the Fed's main jobs were simply establishing new checking accounts and grinding out banknotes, that's what it might do.
One can imagine a scenario in which the Fed, beginning soon after the onset of deflation, trades banknotes for portfolios of bad loans, replacing a sea of bad debt with an equal ocean of banknotes, thus smoothly monetizing all defaults in the system without a ripple of protest, reaction or deflation.
The problem with this scenario is that the Fed is a bank, and it would have no desire to buy up worthless portfolios, thereby severely reducing the value of its own portfolio. Even in 1933, when the Fed agreed to monetize some banks' loans, it offered cash in exchange for only the very best loans in the banks' portfolios, not the precarious ones. I suspect that the Fed will likewise extend future credits to only the strongest debtors.
There are only two ways the Fed might act to buy up seas of the most precarious mortgage debts, bundled consumer debts, junk bonds and/or the debts of spendthrift municipalities. Either the government could guarantee all those debts and pay the Fed each time one goes bust, or the government could compel the Fed to take them on.
In a systemic crisis of historic degree, neither of those scenarios would work. If the government were to guarantee the country's -- or the world's -- weak debts, it would be doing so in the face of declining tax revenues. Ultimately, it could not afford to do it.