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Ricardo Reis nearly became the IMF’s chief economist. The London School of Economics professor was reportedly passed over after blunt public criticism of Donald Trump, including the argument that tariffs raise prices, reduce efficiency and create opportunities for political favouritism. Those views may have made him awkward for an institution whose largest shareholder is America, but they also fit the IMF’s need for economists willing to tell governments uncomfortable truths.

His importance goes beyond political candour. Reis’s research addresses three questions central to international economic policy: how much governments can safely borrow, what ultimately constrains central banks, and how countries can obtain emergency supplies of foreign currency.

Cheap public debt can hide a weak economy

One influential argument in public finance starts with a surprising fact: government borrowing costs often remain below the economy’s growth rate. When that happens, a country may be able to run deficits after a crisis and then let economic growth reduce the debt burden relative to GDP.

Reis complicates that reassuring picture by separating the yield on safe government bonds from the return on productive capital. Businesses may still earn high returns from machinery, equipment or new ventures even while the government borrows cheaply. The gap can arise because investors value sovereign bonds for their safety and liquidity, especially where the financial system does a poor job of funding entrepreneurs or protecting them against risk.

That means low government yields do not necessarily signal a healthy economy or unlimited fiscal room. A country can enjoy cheap public borrowing precisely because private investment is starved of funds. Its formal fiscal limit may look distant even as weak financial intermediation holds back growth. Policymakers therefore need to examine the entire allocation of capital, not just compare the interest rate on public debt with GDP growth.

Central banks cannot print their way past every limit

Central banks occupy an unusual financial position. Their liabilities are banknotes and the reserve deposits that commercial banks hold with them. Those claims cannot be redeemed for some outside asset; they can only be exchanged for one another. In that narrow accounting sense, a central bank cannot fail like an ordinary lender.

Yet it still faces economic constraints. It must exchange cash and reserves at par, cannot dictate which form of money the public wants to hold, and cannot force people to keep using a currency whose purchasing power is collapsing. Reis and his co-authors estimate that the market value of the Federal Reserve’s seigniorage—the income-producing assets it can finance with zero-yielding money—is typically worth less than 30% of GDP.

Beyond that capacity, creating money does not generate limitless resources. Excess issuance produces inflation, and sustained abuse can end in hyperinflation and abandonment of the currency. That is the central-bank equivalent of insolvency: not an inability to settle a balance sheet, but the destruction of demand for its money.

A wider safety net for dollar shortages

Global banks often borrow in currencies their own central banks cannot create. A bank outside America may need dollars during a panic, but its domestic monetary authority cannot manufacture them to act as lender of last resort. The Federal Reserve addresses this problem through swap lines, exchanging dollars with a select group of trusted central banks and leaving them to distribute the funds locally.

The IMF lacks the Fed’s unlimited capacity to create dollars, but it has broader membership, surveillance and policy expertise. Reis has proposed that the fund could help underwrite and police swap arrangements between the Fed and responsible economies beyond its usual network. The idea combines the Fed’s financial power with the IMF’s reach, extending crisis insurance without requiring America to judge every foreign borrower directly.

Reis may have been too outspoken for the IMF post, but the episode illustrates the value of intellectual independence. International institutions must preserve political relationships while delivering candid analysis. His work offers exactly that kind of useful friction: it strips comforting slogans from cheap debt, central-bank power and global financial rescues, revealing the real constraints underneath.