Email of the day on what is helicopter money
What is helicopter money?
Thank you for this question which I’m sure will be of interest to the Collective. Last month a subscriber very kindly sent through a report from National Australia Bank laying out in detail what forms helicopter money might take. I posted it in Comment of the Day on June 10th and here is a link to the report.
The short answer is helicopter money is a further extension of the extraordinary monetary measures implemented since the financial crisis. Quantitative easing made vast quantities of capital available to the financial sector in the hope they would lend it out to consumers. The problem was their balance sheets were so heavily impaired they held onto the vast majority of it. Additionally, consumers had less appetite to borrow since they were also repairing their own balance sheets. Helicopter money, in whatever form it may take, amounts to skipping the financial sector and delivering cash directly to consumers.
The repercussions of negative interest rates are already creating a situation where debtors will be able to pay back less than they borrowed. By definition that is a form of helicopter money so it is already a reality but may intensify as the Eurozone and Japan becomes progressively more desperate to stoke inflation.