Talking Finance
Was hat Helikoptergeld mit niedriger Inflation und Konjunkturflauten zu tun? IAN MCMASTER erklärt es Ihnen.
Helicopter money
Imagine that, on your way to work, you look up and see a helicopter circling above. You notice that it is dropping pieces of paper. Picking up one of these from the ground, you realize that it is a €100 banknote. You start collecting as many as you can, but everyone else is doing the same. You manage to trouser ten banknotes — €1,000 of unexpected extra wealth. What do you do with this windfall? Go out on a spending spree? Save the money for a rainy day? A bit of both? The answer will depend on your situation. If you are desperately short of cash, you’ll probably spend most of your windfall quickly.
There’s been a lot of discussion recently about whether “helicopter money” could be the answer to the eurozone’s stubbornly low inflation — below the European Central Bank’s (ECB) target of around two per cent — and its economic sluggishness. We’re not, however, talking about the ECB literally dropping money from helicopters. Rather, the concept of helicopter money is based on a thought experiment, similar to ours, carried out by the late US economist Milton Friedman in the 1960s. Friedman asked what would happen if “one day a helicopter flies over this community and drops an additional $1,000 in bills from the sky”.
At the September meeting of the European Central Bank, Mario Draghi’s penultimate meeting as its president, the ECB announced a new stimulus package that includes more “quantitative easing”, or “QE” — a policy of increasing the supply of money by purchasing bonds from financial institutions. The aim is to push down interest rates and stimulate consumption and investment.
Critics of previous rounds of QE have argued that, although they may have stabilized the financial system, they pushed up asset prices and redistributed wealth to the rich. And with interest rates already at or below zero, critics of QE argue that it would be more effective to give money to consumers directly — via a “people’s QE” or “QE for the people”.
Again, this would not involve the ECB actually dropping money from helicopters but, instead, transferring it to people’s bank accounts. More traditional policies could also be used, such as governments cutting taxes and/or boosting their spending. In all cases, the policies would be financed by increasing the money supply. (For a more detailed discussion, see The Case for People’s Quantitative Easing by Frances Coppola, Polity.)
Interestingly, while announcing another round of traditional QE, Mario Draghi also called on governments such as Germany’s to boost their economies by cutting taxes and/or increasing spending. It’s an appeal that is likely to fall on deaf ears.