04-22-2016, 10:37 PM
Thing is, once you get past arguments about definitions and permanence you get, via DB, to a pretty simple place where helicopter money can take something like four rough forms: “central bank purchases of government bonds with fiscal expansion (similar to QE), cash transfers to the government, write-downs of central bank holdings of government debt, and direct money transfers to the public” And yes, the first suggestion is already happening in an uncoordinated and limited way while the second is being heavily pushed by some in the market as Japan’s next step.
The barriers to helicopter money, charted | FT Alphaville
However, under certain extreme circumstances—sharply deficient aggregate demand, exhausted monetary policy, and unwillingness of the legislature to use debt-financed fiscal policies—such programs may be the best available alternative. It would be premature to rule them out. It’s not as if we haven’t seen it used before, either. Japan’s experience in the 1930s under Takahashi Karekiyo and Canada’s experience through to 1975 are both cited approvingly (with caveats about an eventual loss of fiscal discipline in Japan) and in opposition to the more hyperinflation-y episodes in 1920s Germany and Zimbabwe.
The barriers to helicopter money, charted | FT Alphaville
As we highlighted in earlier sections of this report, a central bank’s uniqueness rests in its ability to run infinite losses as it controls its own unit of account. So long as the central bank commits to doing so until its inflation target is hit, helicopter drops should be far more effective than “traditional” fiscal policy.