Manoj. I never said central banks started in 2008. But something has changed since then. Many of the lenders to provide governments with lots of money prior to 2008 are no longer able to loan money. They are broke, probably cashing in their bond holdings as they come due.

So who is actually lending the government money to carry on deficit financing?

I looked up “quantitative easing” on Wikipedia. Basically the central banks are loaning money to governments to cover their deficits since 2008. And Covid-19 is increasing the amount of quantitative easing happening before.

From the Wiki article on “Federal Reserve”

In 2015, the Federal Reserve earned a net income of $100.2 billion and transferred $97.7 billion to the U.S. Treasury.

This makes the central bank an institution of the federal government. If interest payments are being made to service the loan, most of that interest is coming back to the federal government. So the government is both debtor and creditor of itself.

The logic of this arrangement is lost on me.