{"id":18577,"date":"2016-03-07T13:37:28","date_gmt":"2016-03-07T18:37:28","guid":{"rendered":"http:\/\/olduvai.ca\/?p=18577"},"modified":"2016-03-07T13:37:55","modified_gmt":"2016-03-07T18:37:55","slug":"why-helicopter-money-cant-save-us-weve-already-been-doing-it-for-8-years","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=18577","title":{"rendered":"Why Helicopter Money Can’t Save Us: We’ve Already Been Doing It For 8 Years"},"content":{"rendered":"

Why Helicopter Money Can’t Save Us: We’ve Already Been Doing It For 8 Years<\/a><\/h3>\n
There\u2019s a lot of talk going around these days about \u201chelicopter money.\u201d<\/div>\n
\n
\n

For those unfamiliar, it\u2019s billed as a kind of last Keynesian resort when ZIRP, NIRP, and QE have all failed to boost aggregate demand and juice inflation.<\/p>\n

For instance,\u00a0HSBC said the following<\/a>\u00a0late last month: \u201cIf central banks do not achieve their medium-term inflation targets through NIRP,\u00a0they may have to adopt other policy measures: looser fiscal policy and even helicopter money are possible\u00a0<\/strong>in scenarios beyond QE and negative rates.\u201d<\/p>\n

And here\u2019s Citi\u2019s Willem Buiter from Septemeber: \u201cHelicopter money drops would be the best instrument to tackle a downturn in all DMs<\/strong>.\u201d<\/p>\n

So what exactly is this \u201chelicopter money\u201d that is supposed to provide a lifeline when all of central banks\u2019 other forays into unconventional policy have demonstrably failed? Well,\u00a0here\u2019s Buiter to explain<\/a>\u00a0how it works in theory (this is the China example, but it’s the same concept everywhere else):<\/p>\n

Now whether it\u2019s \u201cfiscally, financially and macro-economically prudent in current circumstances,\u201d (or\u00a0any<\/em>\u00a0circumstances for that matter) is certainly questionable, but what\u2019s\u00a0not<\/em>\u00a0questionable is that it is indeed feasible.<\/p>\n

How do we know? Because we\u2019ve been doing it for 8 long years.<\/p>\n

If you think about what Buiter says above, it\u2019s simply deficit financing.\u00a0The government prints one paper liability and buys it from itself with another paper liability that the government also prints.<\/strong><\/p>\n

Sound familiar?\u00a0It\u2019s called QE.<\/strong><\/p>\n

\n
The first-best would be for the central government to issue bonds to fund this fiscal stimulus and for the PBOC to buy them and either hold them forever or cancel them, with the PBOC monetizing these Treasury bond purchases<\/strong>. Such a \u2018helicopter money drop\u2019 is fiscally, financially and macro-economically prudent in current circumstances, with inflation well below target and likely to fall further.<\/em><\/div>\n<\/blockquote>\n
\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Why Helicopter Money Can’t Save Us: We’ve Already Been Doing It For 8 Years There\u2019s a lot of talk going around these days about \u201chelicopter money.\u201d For those unfamiliar, it\u2019s billed as a kind of last Keynesian resort when ZIRP, NIRP, and QE have all failed to boost aggregate demand and juice inflation. For instance,\u00a0HSBC […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[41,6036,1719,124,130,3405,1839,452,8697,534,1768,1389,1241,661,662,669,775,4789,1940,1939],"class_list":["post-18577","post","type-post","status-publish","format-standard","hentry","category-economics","tag-australia","tag-b","tag-bond","tag-central-banks","tag-china","tag-citibank","tag-deutsche-bank","tag-japan","tag-monetary-base","tag-monetary-policy","tag-negative-interest-rate-policy","tag-nirp","tag-norway","tag-qe","tag-quantitative-easing","tag-reality","tag-switzerland","tag-willem-buiter","tag-zero-interest-rate-policy","tag-zirp"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/18577","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=18577"}],"version-history":[{"count":2,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/18577\/revisions"}],"predecessor-version":[{"id":18579,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/18577\/revisions\/18579"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=18577"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=18577"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=18577"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}