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Illustration: Aïda Amer/Axios

The world's most powerful central banks made clear this week that they expect the economic damage from the coronavirus pandemic to be deep and long-lasting and they are arming themselves for war.

Why it matters: We are entering an uncharted era of central banking that will see the Fed and its peers lend money directly to businesses, take unprecedented risks and directly support tremendous portions of the global economy.

  • "There are a number of concerns but I think the attitude of central banks right now is 'Damn the torpedoes, full speed ahead,'" Kathy Jones, chief fixed-income strategist at Charles Schwab, tells Axios.

Driving the news: After announcing Wednesday that it would do whatever it takes and then some to buoy the U.S. economy, the Fed unveiled a beefed-up new version of its $600 billion Main Street Lending Program that will effectively shred parts of the 1913 Federal Reserve Act (with authorization from the Treasury Department).

  • That followed announcements from the European Central Bank and Bank of Japan in the preceding two days for massive lending and bond-buying programs that would be increased, in ECB president Christine Lagarde's words, “by as much as necessary and for as long as needed."

The big picture: Central banks were established to keep inflation in line and to use their lending powers only to purchase assets backed by their governments.

  • However, since the BOJ first began a quantitative easing program to prop up Japan's economy, central banks have been providing more and more support.
  • The world's central banks currently hold around $25 trillion of financing on their balance sheets and have committed to do everything from invest in companies with junk credit ratings to buy stocks.

The bottom line: This is not what central banks were designed to do, but in the face of this historic economic shock and in the absence of clear alternatives, it is what they are doing.

  • No one is quite sure what happens next.

Go deeper: The Fed goes to war with coronavirus

Go deeper

Updated Aug 9, 2020 - Politics & Policy

Republicans and Democrats react to Trump's coronavirus aid action

President Trump speaks to workers at a manufacturing facility in Clyde, Ohio, on Thursday. Photo: Scott Olson/Getty Images

Some Republicans joined Democrats in criticizing President Trump Saturday night for taking executive action on coronavirus aid, with Democratic leaders demanding the GOP return to negotiations after stimulus package talks broke down a day earlier.

Why it matters: Trump could face legal challenges on his ability to act without congressional approval, where the constitutional power lies on federal spending. Sen. Ben Sasse (R-Neb.) was the most vocal Republican critic, saying in a statement: "The pen-and-phone theory of executive lawmaking is unconstitutional slop."

Updated 8 hours ago - Politics & Policy

Coronavirus dashboard

Illustration: Aïda Amer/Axios

  1. Vaccines: Key information about the effective COVID-19 vaccines — Oxford and AstraZeneca's vaccine won't just go to rich countries.
  2. Health: U.S. coronavirus hospitalizations keep breaking recordsWhy we're numb to 250,000 deaths.
  3. World: England to impose stricter regional systemU.S. hotspots far outpacing Europe's — Portugal to ban domestic travel for national holidays.
  4. Economy: The biggest pandemic labor market drags.
  5. Sports: Coronavirus precautions leave college basketball schedule in flux.
Updated Aug 10, 2020 - World

PM prepares for "COVID election" as NZ marks 100 days of no community spread

New Zealand's Prime Minister Jacinda Ardern attends the launch of the Labour Party's election campaign in Auckland on Saturday. Photo: Michael Bradley/AFP via Getty Images

AUCKLAND, New Zealand — New Zealand has now gone 100 days with no detected community spread of COVID-19, the Ministry of Health confirmed in an emailed statement Sunday.

Why It Matters: New Zealanders are going to the polls on Sept. 19. Prime Minister Jacinda Ardern has been widely praised for her leadership that saw NZ lock down hard for several weeks before all domestic restrictions were lifted in June. She sees her government's response to and recovery from the coronavirus outbreak as key to her Labour Party being re-elected.