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 Chinese authorities are often accused of being irresponsible or opportunist regarding their monetary policies. According to an article written in the Financial Times by Arthur Budaghyan, from BCA Research, China has chosen the path of unrelenting monetary stimulus.
“Over the past 10 years, Chinese banks have been on a credit and money creation binge. They have created Rmb144tn ($21tn) of new money since 2009, more than twice the amount of the money supply created in the US, the eurozone and Japan combined over the same period. Continue reading “Monetary policies, helicopter money: China, USA and Europe”
Quantitative Easing: a policy whereby a Central Bank, such as the FED or the ECB or the Bank of Japan, purchases existing government bonds in order to pump money directly into the financial system; the ultimate goal is to solve banking problems and to promote consumption and investment.
Helicopter money: the creation of money by central banks and its distribution for free to taxpayers in order to solve unemployment and economic problems. Continue reading “Helicopter Money is different from Quantitative Easing”
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 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”