A daring new approach to solving the economic slump that has taken hold in Europe is gaining popularity in official circles.
Helicopter money refers to money figuratively “dropped from the sky”, or freshly created cash used to fund infrastructure projects or put directly into the hands of citizens.
Rather than being thrown from the sky, helicopter money might mean every UK citizen being credited with, say, £500 from the central bank straight into their current account.
Or government spending on new roads and railways financed by bonds that are then immediately bought by the central bank with newly created money and held until maturity.
Lord Adair Turner, former chairman of the UK finance regulator the Financial Services Authority, has urged serious consideration of helicopter money to rebalance growth in stuttering and highly indebted economies around the world.
“We are in such a deep deflationary trap that we should consider what Milton Friedman called helicopter money,” Lord Turner said at a conference on Transforming Finance in London on 11 May.
Jeremy Corbyn has also advocated a “people’s quantitative easing” which has some similarities to helicopter money.
And the idea seems to be gaining traction among some central bankers. In March, Mario Draghi, the president of the European Central Bank, described helicopter money as a “very interesting concept”.
The name comes from Milton Friedman, Margaret Thatcher’s favourite free-market economist. His 1969 idea was that central bankers could never fail to keep the money supply growing healthily since they could always drop freshly printed bills from a helicopter onto the cash-starved economy below.
This gets around the usual drawback of quantitative easing through the central bank buying up government debt. This can often end up raising the price of assets such as the government bonds. But it doesn’t necessarily mean consumers have more money to spend.
Studies have shown that creating brand new money by using helicopter money has a limited effect on inflation when the economy is already verging on deflation.
It also means the new money created can be more evenly distributed than in conventional quantitative easing and doesn’t simply benefit the rich who have lots of assets already.
Some officials might be coming round to the idea because many major economies are still struggling to return to growth eight years after the global financial crisis.
The most ridiculous claims made about Jeremy Corbyn
The most ridiculous claims made about Jeremy Corbyn
1/11 He called Hezbollah and Hamas ‘friends’
True. In a speech made to the Stop the War Coalition in 2009, Mr Corbyn called representatives from both groups “friends” after inviting them to Parliament. He later told Channel 4 he wanted both groups, who have factions designated as international terror organisations, to be “part of the debate” for the Middle East peace process. “I use (the word ‘friends’) in a collective way, saying our friends are prepared to talk,” he added. “Does it mean I agree with Hamas and what it does? No. Does it mean I agree with Hezbollah and what they do? No.”
2/11 ‘Jeremy Corbyn thinks the death of Osama bin Laden was a tragedy’
Partly false. David Cameron used this as a line of attack at the Conservative Party conference but appears to have left out all context from Mr Corbyn’s original remarks. In an 2011 interview on Iranian television, the then-backbencher said the fact the al-Qaeda leader was not put on trial was the tragedy, continuing: “The World Trade Center was a tragedy, the attack on Afghanistan was a tragedy, the war in Iraq was a tragedy.”
3/11 He is ‘haunted’ by the legacy of his ‘evil’ great-great-grandfather
False. A Daily Express exposé revealed that the Labour leader’s ancestor, James Sargent, was the “despotic” master of a Victorian workhouse. Addressing the report at the Labour conference, Mr Corbyn said he had never heard of him before, adding: “I want to take this opportunity to apologise for not doing the decent thing and going back in time and having a chat with him about his appalling behaviour.”
4/11 Jeremy Corbyn raised a motion about ‘pigeon bombs’ in Parliament
This one is true. On 21 May 2004, Mr Corbyn raised an early day motion entitled “pigeon bombs”, proposing that the House register being “appalled but barely surprised” that MI5 reportedly proposed to load pigeons with explosives as a weapon. The motion continued: “The House… believes that humans represent the most obscene, perverted, cruel, uncivilised and lethal species ever to inhabit the planet and looks forward to the day when the inevitable asteroid slams into the earth and wipes them out thus giving nature the opportunity to start again.” It was not carried.
5/11 He rides a Communist bicycle
False. A report in The Times referred to Mr Corbyn, known for his cycling, riding a “Chairman Mao-style bicycle” earlier this year. “Less thorough journalists might have referred to it as just a bicycle, but no, so we have to conclude that whenever we see somebody on a bicycle from now on, there goes another supporter of Chairman Mao,” he later joked.
6/11 'Jeremy Corbyn will appoint a special minister for Jews'
False so far. The Sun report in December was allegedly based on a “rumour” passed to the paper by a Daily Express columnist who has written pieces critical of the Labour leader in the past. The minister did not materialise in his shadow cabinet.
7/11 ‘Jeremy Corbyn wishes Britain would abolish its Army’
False. Another gem from The Sun took comments made at a Hiroshima remembrance parade in August 2012 where Mr Corbyn supported Costa Rica’s move to abolish it armed forces. “Wouldn’t it be wonderful if every politician around the world…abolished the army and took pride in the fact that they don’t have an army,” he added. The caveat that “every politician” must take the step suggests Mr Corbyn does not support UK disarmament just yet.
8/11 Jeremy Corbyn stole sandwiches meant for veterans
False. The Guido Fawkes blog claimed that the Labour leader took sandwiches meant for veterans at at Battle of Britain memorial service in September but a photo later emerged showing him being handed one by Costa volunteers, who later confirmed they were given to all guests.
9/11 He missed the induction into the Queen’s privy council
True. After much speculation about Mr Corbyn’s republican views and willingness to bow to the monarch, his office confirmed that he did not attend the official induction to the privy council because of a prior engagement, but did not rule out joining the body.
10/11 Jeremy Corbyn refuses to sing the national anthem.
Partly true. The Labour leader was filmed standing in silence as God Save the Queen was sung at a Battle of Britain remembrance service but will reportedly sing it in future. Mr Corbyn was elusive on the issue in an interview, saying he would show memorials “respect in the proper way”, but sources said he would sing the anthem at future occasions.
11/11 He is a member of the All-Party Parliamentary Group for Cheese
True. The group lists its purpose as the following: “To increase awareness of issues surrounding the dairy industry and focus on economic issues affecting the dairy industry and producers.”
But economists have argued that helicopter money should be considered as part of a bigger plan to revive the economy, rather than an outright solution in itself.
“This should not be considered as a crazy idea but nor should it be considered as a panacea,” Lord Adair said.
“We probably need it as part of the total toolkit. Once it is in the toolkit we need to use it with care, but we should not treat it as something unacceptable.”
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- quantitative easing
- helicopter money
- Lord Turner
- Mario Draghi
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