Rolf Englund IntCom internetional
In an essay last year, entitled "Rethinking the Deficit Monetization Taboo to Save the Euro’" he said the attempt to restore debt sustainability through austerity had failed.
The only way out is “strong fiscal stimulus” to boost demand and close the output gap, accompanied by “conditional and temporary overt monetary financing at European level”.
The paper drew heavily on work by Britain’s Lord Adair Turner, a global champion of controlled monetary financing of deficits for countries in a liquidity trap.
Monetary rescue helicopters getting bigger
Mario Bothers: Germany Takes Aim at the European Central Bank
The idea of pumping money directly into the economy, Draghi said, was a "very interesting concept," with a helicopter to distribute the money across the country if necessary, as economists have half-jokingly recommended.
German money being thrown out of a helicopter: It would be difficult to find a more fitting image to show people that the money they have set aside for retirement may soon be worth very little.
A few weeks ago, Finance Minister Wolfgang Schäuble warned the ECB head that his ultra-loose monetary policies could "ultimately end in disaster."
A helicopter drop means that the ECB would print and distribute money to citizens directly.
If it were to distribute, say, €3,000bn or about €10,000 per citizen over five years, that would take care of the inflation problem nicely.
The policy would bypass governments and the financial sector.
The financial markets would hate it. There is nothing in it for them.
Helicopter Money Might be Closer Than You Think
With governments still unwilling to flex their fiscal muscles to boost the world economy,
Let us suppose now that one day a helicopter flies over this community and drops an additional $1,000 in bills from the sky, which is, of course, hastily collected by members of the community.
Budgetpolitiken kan visserligen bli mer aktiv i några länder med låg statsskuld, såsom Sverige. Men de flesta länder är alltför skuldsatta.
Sverige har utrymme att svara med lånefinansierade offentliga utgifter för infrastruktur. Men andra länder har inte den möjligheten, eftersom de är för djupt skuldsatta.
Det finns dock ett medel kvar som inte prövats – så kallade helikopterpengar.
Rolf Englund Facebook 1 mars 2016
Helicopter drops might not be far away
More recently, this is the policy foreseen by Ray Dalio, founder of Bridgewater, a hedge fund.
Also the recommendation of Adair Turner, former chairman of the Financial Services Authority, in his book Between Debt and the Devil .
“Helicopter drops” of money have clearly moved from the realms of economic black magic to taking up a respectable role in the monetary toolbox.
In other words, so weird and wonderful is the world of monetary economics that
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After years of record low interest rates, central banks may resort to just dumping cash out of helicopters
The Simple Analytics of Helicopter Money: Why It Works — Always
The helicopters start to drop money
This Is The Endgame, According To Deutsche Bank
While it has obvious flaws and huge risks (eg political manipulation and inflation), one can argue it will always have more economic impact than QE in its current form.
Helicopter Money And The Comeback Of Gold
Helikopterpengar är vad man kan kalla en tryckpressfinansierad direkt transferering till hushållen.
Det finns mer att läsa om helikopterpengar, exempelvis ett uppmärksammat tal av Ben Bernanke, en debatt mellan Adair Turner och Michael Woodford, en riktig djupdykning av Willem Buiter och ett marknadsbrev av Andreas Wallström.
Jag tycker det är skriande uppenbart att räntan världen över är för låg och att en större del av stimulanserna borde ske via finanspolitiken.
No, the Fed doesn’t have a helicopter, why do you ask?
Should there be another round of QE/helicopters, we must surely find a better way to inject the money.
Helicopters can be dangerous
Draghi’s recent speech at the annual gathering of central bankers in Jackson Hole has excited great interest,
The helicopter has landed: yet the public at large feels little benefit, sees little stimulus.
There are many ways central banks can give money away without hiring a helicopter.
The new radicals want to give the cash central banks are creating directly to the public rather than the bankers. This makes good sense.
The case for helicopter money
When arguing that monetary policy is already too loose, critics point to exceptionally low interest rates and the expansion of central bank balance sheets. Yet Milton Friedman himself, doyen of postwar monetary economists, argued that the quantity of money alone matters.
Measures of broad money have stagnated since the crisis began, despite ultra-low interest rates and rapid growth in the balance sheets of central banks,
Under fiat (that is, government-made) money the supply of reserves is potentially infinite.
True, central banks can pretend reserves are limited. In practice, however, central banks will advance reserves without limit to any solvent bank (and, as we have seen, to insolvent ones).
With central banks able to supply reserves at will, the constraints on lending are solvency and profitability. Expanding banking reserves is an ineffective way to increase lending, not a dangerous one.
First, it is impossible to justify the conventional view that fiat money should operate almost exclusively via today’s system of private borrowing and lending.
Why should state-created currency be predominantly employed to back the money created by banks as a byproduct of often irresponsible lending?
Why is it good to support the leveraging of private property, but not the supply of public infrastructure? I fail to see any moral force to the idea that fiat money should only promote private, not public, spending.
Rolf Englund blog 5 december 2009:
Let me tell you a little secret, folks.
A breakthrough speech on monetary policy
That such economic fatalism is nonsensical is the key message of a truly historic speech delivered on Wednesday by Adair Turner, chairman of Britain’s Financial Services Authority and one of the most influential financial policymakers in the world.
Turner argues that a virtually surefire method of stimulating economic activity exists today and that politicians and central bankers can no longer treat it as taboo:
Newly created money should be handed out to the citizens or governments of countries that are mired in stagnation and such monetary financing of tax cuts or government spending should continue until economic activity revives.
The idea of distributing free money to end deep recessions has been promoted theoretically by serious economists since the 1930s, when it was one of the few practical policies that Keynesians and monetarists agreed on.
John Maynard Keynes proposed burying money in disused coal mines to be dug up by unemployed workers, while Milton Friedman suggested dropping money out of helicopters for citizens to pick up.
Should Bank /of England/ start the helicopter?
Let the helicopters start to drop money. Go, go, go.
Should Bank /of England/ start the helicopter?
Radical or not - would a helicopter drop actually work? To even begin to answer this question, we need to understand how this policy would differ from what the Bank of England is already doing, with its quantitative easing.
In fact, the difference between quantitative easing and "printing money to fund the deficit" comes down to one thing: when and whether the money is paid back.
That is where the "helicopter drop" proposal comes in.
If you really want to understand all this, you should read David Miles' speech last month to the Scottish Economic Society (NB: If you're scared off by the graphs, just read pages 10-11.)
Winding and unwinding extraordinary monetary policy
Those of you have struggled this far might wonder whether, in an environment of massive private and public debts, a bit more inflation might not be such a bad thing. That is, after all, how a large part of the public debt built up during World War II was brought down.
It is also what many critics believe will ultimately happen as result of the drastic and unconventional tactics that the world's leading central banks have all taken in the past few years.
Lorenzo Bini Smaghi satt i högsta ledningen för ECB mellan juni 2005 och november 2011
Efter en kris uppstår oftast jobbiga val. Skuldberg ska bantas bort, budgetar kanske måste kapas och reformer genomföras för att få igång jobb och tillväxt. Det är sådant som kostar, både för medborgarna och inte minst för de politiker som ska fatta besluten.
Centralbanken erbjuder en bekväm genväg. En knapptryckning. Så enkelt kan ju dessa nästan magiskt utrustade institutioner trolla fram nya elektroniska pengar som tillexempel den amerikanska centralbanken Federal Reserve just nu gör i en takt av 85 miljarder dollar varje månad.
Detta har pågått länge. Åtminstone ända sedan börskraschen 1987 har Federal Reserve reagerat med sänkta räntor och sedelpressen på varje ny kris. Det hände efter de amerikanska bankproblemen i början av 90-talet, efter Asienkrisen och hedgefonden Long Term Capital Managements fall 1998, när dotcombubblan brast och när två flygplan flög in i World Trade Center. Och efter finanskrisen 2008.
Varje bubbla har bara ersatts av en ny och större. Och varje gång är centralbankerna där och sopar bort problemen.
What to do with the eurozone banking system?
Central bankers say they are flying blind
Riktiga karlar är inte rädda för lite inflation
Inlägg på Rolf Englund blog om att det behövs mer finanspolitik
Let the helicopters start to drop money. Go, go, go.
Come on Bernanke, fire up the helicopter engines
No one has explicitly argued for this as a deliberate act. But Milton Friedman raised the possibility in an essay he wrote on the “optimum quantity of money”.
He mentioned the helicopter as a device to avoid discussing the intricacies of the banking system, which he had done sufficiently on other occasions.
Years later, Mr Bernanke described various expedients, including quantitative easing, as being the nearest equivalent to such a drop. This led to some on Wall Street naming him “Helicopter Ben”
John Maynard Keynes raised a similar possibility during the 1930s when he said that if there was no better way of getting out of a depression, pound notes should be buried in the ground, leaving it to the well-tried forces of self interest to dig them up again.
Why can’t we just boost spending or cut taxes in the time-honoured manner? The main reason is ideological. The prevailing dogma is that anti-slump measures must be on the monetary side rather than the fiscal one.
Jag tycker det är skriande uppenbart att räntan världen över är för låg och att
Now the Fed has done what it's done and will promise to do more. At last week's meeting of the its Open Market Committee, the Fed essentially said it might as well hold future meetings at Strategic Air Command headquarters outside Omaha, Neb.,
The central bank helicopters are planning a co-ordinated drop of liquidity on troubled market waters.
The money to be dropped now is not that large. But if this does not work, more will surely follow. The helicopters will fly again and again and again.
One point is clear: central banks must be pretty worried to take such a joint action. For what is remarkable about Wednesday’s statement is that five central banks – the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve and the Swiss National Bank – are co-ordinating their (different) interventions. Their hope must be that this action will trigger not panic (”what do the central banks know that I do not?”) but confidence (”now that the central banks are prepared to intervene in this way, I can at last stop worrying”).
The battle may not yet be won, but the cavalry has arrived.
Monetary rescue helicopters getting bigger, FT Gillian Tett December 18, 2007