There is a good alternative to helicopter money, one that could be tried by governments in a time of pandemic: a fiscal policy based in high progressive income taxes, that is, a policy in which the rich but also the high-paid people would be subject to much higher tax rates (at least as long as the crisis lasted).
Let me explain what I mean, by telling you a story inspired by Enrico Moretti, a Professor of Economics at the University of California, Berkeley. Continue reading “High-paid workers and the Coronavirus relief”
The Germans are averse to bold monetary policies. And they have some allies in Europe: the present Dutch and Austrian governments, for instance.
They do not forget their bad experience with printing money, a century ago. And since they can block the decisions of the European Central Bank (ECB), the other countries can do very little, even if they are in the majority.
The post-2008 years can tell us a lot about what may happen in the next months and years, in Europe, in the aftermath of the coronavirus pandemic. Continue reading “Coronavirus, Helicopter Money, Adair Turner and the end of the Euro”
The balance between the monetary base and the available amount of goods and services is provided through the system of prices. If the parity is broken by excessive issuance of money, prices will have to change too, and inflation may soar.
That’s a basic monetary law.
However, economic laws do not have the fixity of natural laws, and some economists are now contending that there is some decoupling between money supply and inflation. Continue reading “How much Helicopter Money can be created?”
The expression helicopter money is often attributed to the conservative economist Milton Friedman.
Here is a small extract of what he wrote, at a time when he was an unknown and young economist: Continue reading “What do economists think about Helicopter Money?”
Consider what Fareed Zakaria wrote this week, in the Washington Post, about the American government and its poor performance in controlling the Coronavirus outbreak.
“The United States is paying the price today for decades of defunding government, politicizing independent agencies, fetishizing local control, and demeaning and disparaging government workers and bureaucrats.”
Continue reading “Coronavirus pandemic is showing that strong central governments are as important as strong markets”
The coronavirus pandemic is causing economic havoc.
But it can also offer an opportunity to carry out ambitious climate-friendly policies. Governments can enlarge their interventions and expand their policies to climate areas.
This may seem a stupid statement; governments are assuming huge debts and are too swamped with the coronavirus crisis to open another battle front.
Well. Is it so? Think twice. Continue reading “Could the fight against the Coronavirus pandemic be linked to climate policies?”
The coronavirus pandemic is causing a huge contraction and high unemployment in most economies worldwide. According to the St Louis FED projections, the economic American freeze could send the unemployment rate past 32%.
This may encourage policymakers to try new strategies, including unconventional monetary finance like helicopter money, that is, the creation of money by central banks and its distribution for free to taxpayers or companies in order to solve unemployment and economic problems. Continue reading “Coronavirus Pandemic and Helicopter Money”
The stay-at-home-social-distancing coronavirus policies are being supported by financial packages of billions or trillions of dollars.
And also by active monetary policies taken by the central banks: the injection of money in the economy through loans at zero interest rates (or even negative interest rates) or quantitative easing policies: the purchasing of bonds and other debt instruments. Continue reading “What are the alternatives to the stay-at-home coronavirus pandemic policies?”