Governments around the world are responding forcefully to the Covid-19 crisis with a combined fiscal and monetary response that has already reached 10pc of global GDP.
Yet according to the latest global assessment from the United Nations Department of Economic and Social Affairs, these stimulus measures may not boost consumption and investment by as much as policymakers are hoping.
The problem is a significant portion of the money is being funnelled directly into capital buffers, leading to an increase in precautionary balances. The situation is akin to the "liquidity trap" that so worried John Maynard Keynes during the Great Depression.
Today's stimulus measures have understandably been rolled out in haste - almost in panic - to contain the economic fallout from the pandemic. And while this fire-hose approach was neither targeted nor precise, many commentators would argue it was the only option at the time.
Without a massive injection of emergency liquidity, there probably would have been widespread bankruptcies, losses of organisational capital and an even steeper path to recovery.
But it is now clear the pandemic will last much longer than a few weeks, as was initially assumed when these emergency measures were enacted. That means these programmes all need to be assessed more carefully, with an eye to the long term.
During periods of deep uncertainty, precautionary savings typically rise as households and businesses hold on to cash for fear of what lies ahead.
The current crisis is no exception. Much of the money that households and businesses receive in the form of stimulus cheques will probably sit idle in their bank accounts owing to anxieties about the future and a broader reduction in spending opportunities.
Banks will likely have to sit on the excess liquidity, for lack of credit-worthy borrowers willing to take out fresh loans.
Not surprisingly, excess reserves held in US depository institutions nearly doubled between February and April, from $1.5trn (€1.3trn) to $2.9trn (€2.5trn).
For comparison, excess reserves held in banks during the Great Recession reached just $1trn.
This massive increase in bank reserves suggests the stimulus policies implemented so far have had a low multiplier effect. Clearly, bank credit alone is not going to lead us out of the current economic stalemate.
Making matters worse, today's excess liquidity may carry a high social cost. Beyond the usual fears about debt and inflation, there is also good reason to worry the excess cash in banks will be funnelled toward financial speculation.
Stock markets are already gyrating wildly on a daily basis and this volatility could in turn perpetuate the climate of increased uncertainty, leading to still more precautionary behaviour and discouraging consumption and the investment needed to drive the recovery.
In this case, we will be facing a liquidity trap and a liquidity conundrum: massive increases in the supply of money and only limited uses for it by households and businesses. Well-designed stimulus measures could help once Covid-19 has been brought under control. But as long as the pandemic is still raging, there can be no return to normalcy.
The key for now, then, is to reduce risk and increase incentives to spend. As long as firms are worried the economy will remain weak six months or a year from now, they will postpone investment, thereby delaying the recovery.
Only the state can break this vicious circle. Governments must take it upon themselves to insure against today's risks by offering compensation for firms in the event the economy does not recover by a certain point in time.
There is already a model for doing this: "Arrow-Debreu securities" (so named for the Nobel laureate economists Kenneth Arrow and Gérard Debreu) would become payable under certain predetermined conditions.
For example, the government could guarantee that if a household bought a car today, and the epidemic curve remained at a certain point six months from now, its monthly car payments would be suspended.
Similarly, income-contingent loans and mortgages could be used to encourage the purchase of a wide range of consumer durables, including housing. Similar provisions could apply to real investments made by firms.
Governments also should consider issuing spending vouchers to stimulate household consumption. This is happening in China, where local governments across 50 cities are issuing digital coupons that can be used to buy goods and services within a certain timeframe.
With the pandemic likely to last much longer than was originally assumed, still more stimulus will be necessary. Although the United States, for example, has spent $3trn on various forms of assistance, without more - and, one hopes, better-designed - measures, that money will have merely prolonged the lives of many enterprises by a few months rather than actually saving them.
One approach that has been working in several countries is to provide assistance to firms on the condition they retain their workers, supporting wage bills and other costs in proportion to an enterprise's decrease in revenue.
Poorly designed stimulus programmes are not just ineffective but potentially dangerous. Bad policies can contribute to inequality, sow instability and undermine political support for government precisely when it is needed to prevent the economy from falling into a prolonged recession.
Fortunately, there are alternatives. But whether governments will take them up remains to be seen.
Hamid Rashid co-authored this article