La Tribune: Will the ECB dare use its helicopter?
In the French newspaper La Tribune, journalist Romaric Godin explains the pros and cons of doing quantitative easing for the People.
The problem with QE is the great weakness of aggregate demand in the euro zone. Due to the lack of the demand, the improvement in lending conditions do no translate into more credit-led for investments. Even if credit money is cheap, why taking on more debt to invest into a slack economy lacking of perspectives?
Therefore, he goes:
Once this observation done, what to do? The ECB could consider a form of "helicopter money". This idea was theorized by the father of monetarism, Milton Friedman and meant as a metaphor as if newly created money would be dropped from helicopters over the population. The general (and simplified) principle is to distribute fresh money not to the banks anymore, but directly to people, in order to stimulate directly the economy and bypassing intermediaries. This would have an immediate effect on inflation. The effect on aggregate demand would bring back optimism for companies to invest.
Further Godin reckons the idea is trending:
The idea used to be observed with a lot of mistrust until it came back in America in 2012. Since then, the idea is making its way and is sometimes mentioned as a ultima ratio by the ECB watchers. And we are getting much closer to point of 'last resort'.
But is it legal? According to Romaric Godin "EU Treaties do not explicitely prohitibit the use of helicopter money."
You can read the whole piece (in French) here.