Helicopter Money

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Helicopter Money

‘‘Central-bank balance sheets have swelled, and policy rates have reached their “near zero” lower bounds. There is plenty of cheap water, it seems, but the horse refuses to drink…policymakers have one more option: a shift to “purer” fiscal policy, in which they directly finance government spending by printing money – a so-called “helicopter drop…The new money would bypass the financial and corporate sectors and go straight to the thirstiest horses: middle- and lower-income consumers directly, and through investment in job-creating, productivity-increasing infrastructure.’’ – Kemal Dervis

Banks and Digitalisation

Banks are creating inequality and unable to handle financial crises. They must be responsible to handle any kind of financial crisis and inequality too in line with technological advancement and digitalization. @INCOMESCO 

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12 Comments

  1. We’re now in an era where commonly accepted economic “isms” are being questioned daily.

    For many, economic concepts that held true for generations, don’t have the relevance they once had. As members of the middle-class attest to, even the terms Capitalism or Socialism fail to address the disconnect they feel with a new economy that operates in ways they’re unaccustomed to.

    Ironically, while the middle class is often advised to spend more to stimulate an under-stimulated economy, wealth inequality seems to be on the rise. To the average person
    who’s striving to save, it’s ironic they’re now being told to possibly accumulate more debt to stimulate the economy. Many are now asking whether economic stimulus has inadvertently evolved into a process whereby most of the stimulus benefits go to the wealthy.

    Obviously, one has to wonder if the stimulus policies that worked for years, will ever work the same way again. Is it possible that just as one can become physically accustomed to certain stimulants such as caffeine, that the effects of economic stimulus no longer take hold like they once did? In addition, many economic experts now wonder if government policy may be adding to the problem of an under stimulated economy that seems to benefit the wealthy elite the most.

    As Kermal notes, with interest rates now at record lows, there really is almost nowhere left to go to stimulate.

    This is why the direct transfer of funds-“the helicopter money,” is being advocated so money will go directly into the hands of those that need it most. The theory is that this money transfusion will stimulate the economy into a healthy balance. Hopefully, if this were to come to be, there would also be support for those that wish to save this money or use it to pay down debt.

    Thx for the post!

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  2. Economist Steve Keen has suggested that household debtors should be required to pay down debt with their portion of helicopter money, while savers should be required to spend theirs. This would act to raise consumption spending and demand, as well as reduce the still high levels of household debt. Maybe it could work. The work of Keen is certainly interesting, and he posts on http://www.debtdeflation.com/blogs

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  3. That is also why there is such a push towards increasing minimum wages. Like helicopter money, it is intended to provide rebound stimulus after helping those who need it the most . Unfortunately this will be like a light mist on parched soil, it just won’t go deep enough.
    But to decrease debt and increase savings I’m afraid the only approach would be to increase taxes on the wealthiest. That money could then be used to reduce government debt which would allow for increasing interest rates for individual savings.
    If coupled with a good public relations campaign say, similar to the war bonds campaigns in the past; Households could be motivated to structure their new found wealth with a healthier balance of savings to debt.
    Saying that we need to increase taxes on the wealthiest may not be the political poison it once was . Redistributing the unbalanced wealth on the planet is a physical reality. And like global warming, denying it won’t make it go away.
    We all know the value of money printed out of thin air and we can leave the mana from heaven analogies for the comidians.

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    1. Thank you Tome for the incredible thought. Tax is the greatest economic tools to create balance if the state handle it properly and progressively. Interest rate may not be helpful to the low income group. Today’s income distribution system is absolutely unfair so itself has given the big space to be changed.

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