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Michel Aglietta * Conseiller, CEPII et France Stratégie. Contact :
Sabrina Khanniche Economiste senior, Pictet Asset Management

Global capitalism has undergone two systemic crises in twelve years, the Great Financial Crisis (GFC) and the Covid-19 crisis. The trigger was different, but the expansion of private and public debt over the financial cycle has generated similar financial vulnerabilities through interactions between debt and liquidity.

We study the dynamic of liquidity in both systemic crises to display the crucial role of money in the momentum of the financial cycle. We compare the financial linkages that have led to the drying up of liquidity in both crises.

We show the crucial role of central banks that have overstepped the limited and temporary role assigned by the utility theory of money to the lender of last resort. Money is the basic social link of market economies and the central bank is the institution safeguarding monetary sovereignty in crises.

Central banks have innovated to take care of the money markets entirely and to supply credit to the non-financial private sector in tight coordination with governments.

The irruption of environmental risks, exhibited in the pandemic crisis, allows concluding that central banks will be core actors in the transformation of capital markets required by sustainable development. Macroprudential and monetary policies should be implemented closely.

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