4 ideas
In mid-March 2020, as Covid spread, investors sold even US Treasuries, the supposed safe asset, to raise dollars, and the market for the world's benchmark collateral nearly seized up. This is the concrete case of a central bank acting as dealer of last resort for the entire market-based financial system, not just for banks.
Once credit runs through securities markets instead of bank balance sheets, a panic shows up as a fire sale of assets, not a run on deposits. The lender-of-last-resort role therefore turns into a market-maker-of-last-resort role: the central bank has to stand behind asset prices themselves. This creates an implicit, open-ended public guarantee for private asset holders, which inflates wealth inequality and weakens market discipline.
Treat the 2020 pandemic as a simultaneous stop in global production, trade and credit, not just a health emergency with economic side effects. Seen this way, the decisive moves happened in dollar funding markets, emerging-market capital flight and corporate credit spreads, and national lockdown choices were constrained by who could borrow and who had access to a dollar backstop. The lens shows that the capacity to survive a shutdown was distributed by financial position in the global hierarchy.
In 2020, governments ran deficits on a scale once thought impossible, including cash transfers, furlough schemes and loan guarantees. Central banks absorbed the resulting debt through bond purchases while insisting they were only pursuing monetary goals. This de facto coordination was improvised and never openly acknowledged, and it showed that the supposed limits on deficit finance for rich states with their own currencies were political rather than technical.