Germany: emerging voices raise interest for helicopter money

Despite the growing concerns in Germany over 'helicopter money' and other monetary policy alternatives, other voices are emerging to demand a serious debate about alternatives to quantitative easing.


Helicopter money – a form of QE for People is the idea that central banks inject cash directly into citizens' bank accounts. It has recently become a mainstream topic of debate since Mario Draghi said he found the concept 'very interesting'.

This comment provoked a wave of criticisms in Germany, with several political leaders ruling it out and several media outlets making headlines against it. “This is an absurd idea” was one response from the German central bank’s governor Jens Weidmann.

Former Finance Minister Supports Helicopter Money

But other emerging voices are supporting the idea. Two weeks ago, two prominent figures of the german left, Fabio de Masi and Oskar Lafontaine co-signed a column in the leading german newspaper FAZ calling on the ECB to consider alternatives like helicopter money or monetary financing for investments. They stated that “The ECB could also make credit payments to the bank accounts of low-income private households at the push of a button.”

Oskar Lafontaine, who served in as Minister of Finance from 1998 to 1999 also recently declared at a conference in Paris that “neither financial markets nor rating agencies can prevent central banks to create money. The European Central Bank had better to use its 60 billion monthly quantitative easing to finance infrastructure projects in Europe instead of buying bonds to banks.” 

Similarly the Hambourg based non -profit organisation World Future Council also advocates for using the central bank’s power of money creation to finance the fight against climate change

The German's Deutsche Bank also released a report highlighting that "the ECB somewhat ironically has greater potential to pursue the most unconventional forms of “helicopter drops” in the form of direct transfers to households, while the more conservative options of transfer to governments or unilateral restructuring appear more restricted."

The former chief economist of Deutsche bank, Thomas Mayer is also a long-running supporter of helicopter money. “The discussion about helicopter money shows that our current monetary system has serious problems. I have great doubts about whether it is permanently viable” he recently said to the german newspaper Handelsblatt.

Mayer also wrote a paper for Lossbach von Storch Research Institute where he explains the benefits of helicopter money in downsizing the level of private debts and he describes a scenario where helicopter money would lead to a better monetary system.

“Helicopter money would facilitate the change-over from our present credit money system to an alternative money system, in which money is no longer created as private debt but as an asset backed by the reputation of the issuer.” Mayer writes.

Now prominent think tanks are also voicing their interest. In a short videoclip, the The Head of the German Institute for Economic Research (DIW Berlin) says helicopter money has the potential to 'help the ECB fulfill its mandate again'. The Professor of Macroeconomics and Finance at the Humboldt University of Berlin has expressed his interest in the idea in a short videoclip, stating: "We need an open debate about the ECB's monetary policy, particularly in Germany. Helicopter money is one option we need to consider seriously.”

DIW-Berlin is one of the leading economic research institutes and think tanks in Europe. It recently released a report outlining the negative side-effects of the current quantitative easing programme. The report concludes that "The ECB’s asset purchase program will most likely, at least in the short-run, exacerbate income and wealth inequalities in the euro area."

Despite the strong cultural and historical resistance against some forms of monetary financing in Germany, there are also alternative voices in this debate. Hopefully those voices will successfully contribute to leveling up an educated and evidence-based on a debate too often dominated by emotional responses.

Credit picture CC fdecomite

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