'Helicopter money' for the global economy?
A radical proposal has been gathering steam in central banks around the world
The smartest insight and analysis, from all perspectives, rounded up from around the web:
It might soon start raining cash, said David Oakley at the Financial Times. With the global economy slowing dramatically and few signs of a turnaround on the horizon, a radical proposal has been gathering steam in central banks around the world: Print money and give it directly to the public in order to boost spending and growth. The concept of "helicopter money" was coined several decades ago by the late economist Milton Friedman, who likened it to stimulus by means of dropping cash from the sky. Advocates of the policy argue that central banks have largely exhausted their options for stimulating growth — namely, quantitative easing and extremely low interest rates — and that desperate times call for desperate measures. Central banks in Japan and Europe, they point out, have already taken the once unthinkable step of slashing interest rates below zero. But helicopter money is arguably an even more extreme solution to stagnant growth — "the nuclear option of monetary policy."
"Is this an idea whose time has come, or is it just monetary voodoo?" asked Jeremy Warner at The Daily Telegraph. Billionaire Ray Dalio, founder of the world's biggest hedge fund, is among the cheerleaders. He argued last month that helicopter money will boost consumer spending by injecting money "directly into the veins of the real economy." But count me among the unbelievers. In all likelihood, the positive effects of a one-off gift would wear off without addressing "any of the underlying causes of today's economic torpor." Central banks would also be tempted to keep printing cash for more drops, a kind of permanent "Christmas bonus" that would lead people to question the value of their money. "Much as we would all like to believe in the free lunch, there is, regrettably, no such thing."
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
Here in the U.S., the helicopter debate seems a bit ridiculous, said Ben Eisen at The Wall Street Journal, since the unemployment rate sits at just 4.9 percent and the economy is growing, though slowly. But it's an open question how long America can avoid being dragged down by the economic malaise afflicting the rest of the world, and helicopter money appears to work best before a crisis hits. Two events here with similar effects offer us that clue: the tax rebate checks mailed to millions of consumers in 2001, for $600, and in 2008, for $1,200. The first time, there was no imminent crisis and Americans spent more than half their checks, "effectively stoking the economy." But during the crisis-era drop, consumers squirreled away nearly two-thirds of the money, dampening its effect. In other words, central bankers shouldn't wait until a recession hits to make their drops.
"The fact that helicopter money is being discussed at all should be fair warning that the whirlybirds are warming up," said Mark Gilbert at Bloomberg View. Deadlocked and dithering governments around the world have so far refused to flex their muscles to boost global growth. Instead, they keep passing the buck to central bankers, who are trying to make do with the shrinking number of tools at their disposal. If helicopter money seems crazy, let's not forget that quantitative easing and negative interest rates did, too, until relatively recently. "Central bankers, it may soon be time to don your flying suits and start your engines."
Create an account with the same email registered to your subscription to unlock access.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
-
Today's political cartoons - March 28, 2024
Cartoons Thursday's cartoons - a House divided, gambling in sport, and more
By The Week US Published
-
Israel concedes it may not be able to destroy Hamas
Speed Read Despite five months of war in Gaza, Israeli intelligence officials admit the militant group eludes them
By Peter Weber, The Week US Published
-
The art world and motherhood: the end of a final taboo?
Talking Point Hettie Judah's new touring exhibition offers a 'riveting riposte' to old cliches
By Chas Newkey-Burden, The Week UK Published
-
Geopolitics and the economy in 2024
Talking Point The West is banking on a year of falling inflation. Don't rule out a shock
By The Week UK Published
-
US-led price cap on Russian oil 'almost completely circumvented'
Speed Read 'Almost none' of seaborne crude oil from Moscow stayed below $60 per barrel limit imposed by G7 and EU last year
By Harriet Marsden, The Week UK Published
-
Mexico's Sinaloa cartel bans fentanyl, reportedly under pain of death
Speed Read The top exporter of fentanyl to the U.S. is apparently looking to diversify as law enforcement turns up the heat
By Peter Weber, The Week US Published
-
The threat posed by bonds to the global financial system
Under The Radar The worst bear market in a century is unleashing huge strain on parts of the financial system
By The Week Staff Published
-
China: a superpower’s slump
The Explainer After 40 years of explosive growth, China’s economy is now in deep distress — with no turnaround in sight
By The Week Staff Published
-
Are Western sanctions working on Russia’s growing economy?
Today's Big Question IMF forecasts Russian growth but one expert says the West must be patient in bid to deter Putin
By Arion McNicoll Published
-
South Africa’s energy crisis explained
feature Electricity blackouts lead to rising crime and economic hardship and add to pressure on ANC
By The Week Staff Published
-
India’s geopolitical aspirations in 2023
feature The emerging Asian superpower is showing ‘growing confidence’ on the world stage
By Chas Newkey-Burden Published