Canadian banks will survive because the reserve ratios are quite adequate. The question they have to deal with is whether to cut their dividends. So far they've been able to maintain them and that has satisfied shareholders

Are you speaking of the US or Canadian experience.? In Canada, the entire mortgage industry is different from the US in many ways. Suffice to say, the CMHC is a Crown corporation and has the full backing of the Federal govt. The Canadian banks underwrite about 75% of all mortgages and the banks are under very tight restrictions by the govt and the Bank of Canada. There is a very small, nascent, MBA market that is no near the relative size of the US. We never had a housing or mortgage meltdown like the one in the US in 2008---not even a hiccup.

With interest rates at 0% and possibly going negative there is no real burden to carry the interest cost indefinitely.

The FED will continue to buy the debt and will not present it to the treasury department for payment but will just accept a reissuing of the debt by the treasury department and continue that indefinitely. So there really isn't a day of reckoning. Governments don't die and that's why comparison between an individual and government is not valid in this case

It is not a matter of the constant inflation rate that is a concern. The rate is slowing down...or disinflation. This is what scares the Fed because it moves further away from their target. Disinflation is very insidious and affects everybody's decisions regarding consumption or production

Maybe the answer is that we have a left of centre govt. The US should consider that option in November.

I agree. We have closed the border and try to keep ourselves safe. And the population at large is cooperating with the government regarding openings

A very good overview of the issue of monetizing debt. As you well explained it it is not a cardinal sin but sensible monetary policy at a time of enormous financial stress.

The stock market is not the economy. It can behave irrationally on the belief that everything will get back to the pre covid days. Many of us think that the world has changed permanently and that growth will be slow and painful as we adjust to new environment. The real impact of the virus will hit in the fall when economy will continue to be weak and reality will set in.

I agree that the definition of money is changed considerably in this digital age. But I think there still is a liquidity trap in that liquidity is held closely by the banks

It could get worse as the bank's contend with loan losses and the fear of a worsening credit environment.

Your point about the intersection of demand and supply is right on. There is a weakening supply supply and also a diminished demand as the economy slows down. A rather dismal Outlook.

Everything just goes at a slower speed--- hence the term velocity.