What is Helicopter Money?

Imagine one fine morning when you wake up and get a bank message saying your balance on your account is plus $ 2,500, which is the amount the government sends to everyone in water to spend. That may sound futuristic – but it’s true, and is being done in many countries around the world during economic turmoil. That is the helicopter money.

When the sun is drought and the rain falls, what’s the first thing you will do with this heavenly money ?, not all, but certainly most people go out to the street to shop and eat for fun. satisfying the days of austerity because the economy goes down.

The concept of helicopter money was seriously debated by economists for the past few years, and is gaining popularity. That’s because despite the trillions of dollars, euros, yen and pounds that central banks have pumped into the global financial system since the credit crisis of 2008, global economic growth has slowed. once again.

Theoretically, helicopter money is given directly to consumers, will directly pull people to the store to spend, boosting confidence in the economy. That increased demand will allow prices to rise again, an important step because slippage prices, known as deflation, are seen as posing a risk of a prolonged economic recession.

What is pre-helicopter policy?

Helicopter money is a term referring to a kind of aggressive monetary stimulus strategy to increase inflation, increase economic output and the need to buy. Although this strategy seems theoretically viable, from a practical standpoint it is seen as a non-traditional monetary policy tool, only hypothetical because it is difficult to implement.

In March 2020, the US Federal Reserve cut interest rates to 0% to combat the Covid-19 pandemic and the gloomy outlook of the world economy. It is followed by rate cuts by most central banks in the world, both to protect the economy and also to protect the national currency.

Since most governments are unwilling or unable to pursue fiscal stimulus by reducing taxes or increasing spending, pressure is on forcing central banks to gain deeper access to their toolkit for Unique policy tool like never before. Helicopter money is back on the agenda as the central bank’s purchase of government bonds – a policy known as quantitative easing – has pushed yields in some bond markets down to levels. Therefore, the scope of stimulating the economy by pushing down borrowing costs is limited.

The origin of the helicopter money

Nobel Prize-winning economist Milton Friedman introduced the concept of helicopter money in 1969. He envisioned a penguin flying in a field and dropping banknotes from the sky as an experiment to see how the With an ever-increasing increase in the money supply, what will people do to spend and save.

This idea made Ben S. Bernanke famous in 2002 when, as governor of the US Federal Reserve (Fed), he mentioned it while arguing that a central bank always had. inflation can be prevented if needed. He was immediately nicknamed “The Helicopter Ben”, despite being a hero during the 2008 recession and also one of the most successful presidents in Fed history.

In a blog post in April 2016, Ben said helicopter money could be the best alternative currency available in some extreme cases. In today’s debates, they envisaged that the helicopter money would be distributed either by crediting it on people’s bank balances or in the form of tax breaks. Crucially, it will come from a one-time-created central bank, rather than being borrowed or spent by the government.

Most recently, the US Treasury Secretary also mentioned this as a solution to save the US economy from the economic crisis of the Covid-19 pandemic.

Discuss

Helicopter money proponents argue it may be less risky than quantitative easing (QE), which is blamed for promoting what is seen as a bubble in stock and bond markets. bridge.

Opponents pointed out that helicopter money was not really free. Printing more money reduces the monetary value of people holding savings in their accounts, the same way that the more Bitcoin mining companies flush the market, the more Bitcoin value will be equivalent in time. there. Conversely, the more Bitcoin is accumulated and held in large wallets, the more it will cost.

Others say helicopter money is an overly complex alternative to the government’s stimulus measures. Also, the danger is that helicopter money can trigger inflation much higher than the 2%, “nice” level for a growing economy.

What is Quantitative Easing (QE)?

Quantitative Easing (QE), English for Quantitative Easing, is a market behavior (usually performed by central banks) in which liquidity and inflation increase, with the goal of stimulating the economy of Vietnam. push businesses and consumers to borrow and spend more.

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