Money from heaven

Out of a slump, consider handing out money to the central banks in the world

"Helicopter money" hedge appears to be an item on an expense claim on the fund. In fact, monetary policy is shorthand daring approach, to publish the government to spend money or give money fund. Some central bankers have whirlybirds (and printing presses) seems to be in preparation. In March, President Mario Draghi, the European Central Bank a "very interesting concept," says the helicopter money. Radical supporters see it as a slumping economy and a -Although remaining. However helicopter money is released in a less radical than the normal sounds. Moreover, the biggest drag on the recovery fails to be a lack of political combat.

The concept of central bankers helicopter money implication in money-starved can always drop onto new bills printed from the economy since the money supply can not fail to Milton Friedman, who mused in 1969 to raise the bottom, monetarism father down. How can the economy grow its deflationary trap of the Japanese economy and confusion, as you suggest, the first cut again in the 2000's. Ben Bernanke, the reason why Friedman's praise for the new governor on his own nickname "Helicopter Ben" income, deflation in the maintenance of talks at the Federal Reserve.

Helicopter money is likely to be less than chuckles today. All the big, rich economies in the world have joined Japan in boring chronic low inflation and interest rates. Nominal GDP growth is low in the aftermath of the financial crisis and tragedy, especially in Europe and Japan, the amount of money in a helicopter the best candidates. The economic weakness of their government bonds (quantitative easing, or QE, known as a policy) to purchase and print trillions of negative territory but continued to customize rates, central banks and mobile 'has been. Indeed, a new strategy appears to be delayed.

Defenders helicopter money certainly does not intend to throw money out of the aircraft. Broadly speaking, they argue that the stimulus-spending in government, tax reduction or debit-financed citizens in the form of a new printed money instead of borrowing or payable budget. QE eligible, so long government bonds to the central bank to buy interest payment and principal in accordance with the Master, his promise to hold them to maturity, the central bank profits, as the federal government back. (She'ba now say that at some point they have to buy government bonds to central banks.) To make a clearer strategy largesse more dark versions of the central bank. This, for example, the new citizens can be printed directly. Jeremy Corbyn, a British party leader, this type of "recommended QE".

It is clear that the benefits of helicopter money. Unlike changes in interest rates, not to rely on credit to be paid by stimulating the central bank. This reduces the risk that central banks inflate new bubbles to help, and the crisis or instability adds to their potency when the banking system was unreliable. Loan will be used the same designs and fiscal stimulus, but consumers think taxes will eventually accumulated a debt-crisis helicopter flies around the money must go to pay for these things to be blunted.

Jordi Galí, an economics-research center in Barcelona CREi economy in 2014 published an article, only slightly inflationary effect on the price only with the slumping economy is "strong impact" could have counted the money from. Deutsche Bank on the economic In a recent survey in the United States and Britain were known to friends during a very wealthy economy, especially the two world wars, suggests that spending by the central bank in the past turned a sudden. In some cases, this has become hyperinflation. If you still are left in the hands of government-controlled machines, free central banks, in particular, should result in less printing money to raise taxes to fund the war weakened slump to print money to avoid injury.

The real problem with the helicopter money that a political solution to a technical problem. European economic slump has been worse than those in the United States and Britain, for example, part of the ECB, was slower to use QE policies; because of. This is European law forbids governments from the central bank money. Only last year did not allow the specter of deflation deepening of Mr. Draghi bond-purchase-money policy was an urgent debate righteousness. The ECB helicopter for the pursuit of money, was created to amend the agreement of the European governments. But if they are willing to give any leeway ECB, I had arrived at this point.

Money is not everything

Likewise, many euro-area governments to near zero for the duration of the 30-year loan costs do; In fact, no longer in Japan. Thank you, rather than stimulating the central banks paid little QE, debt-financed government spending part of the costs. However, EU governments will continue to work to reduce the shortage. Even spendthrift Japan, Shinzo Abe in, Prime Minister recovery plan, the risk is determined to increase the consumption tax in order to reduce the deficit rate. Free money is already available, is a political consensus on how to use it and lost. Helicopter money can help us to think now, that you must believe that the political differences of opinion on the euro area close places. Inflation and risk behavior (and elsewhere) is a depression in Germany, will be the opposite.

If governments began adopting the construction of helicopter use the money this is a good thing. When the next crisis strikes, the central banks have little room to reduce interest rates for certain. The ability to quickly, credit personal bank accounts with cash, for example, A crash would render it easy to control. But there is no way a license.