Giving Money to People is The Only Way, Says French Bank's Chief Economist

A research briefing published by French bank Natixis details why Quantitative Easing does not work in the eurozone, and argues for distributing money directly to people instead.


Update: On January 26th, Natixis published a new report making again the case for helicopter money as a better alternative to the ECB's asset purchase programme.

Last week, French economist and head of Research at Natixis Patrick Artus wrote a briefing (pdf, in french) providing more empirical evidence that the ECB’s quantitative easing has not worked so far. According to the report, all transmission channels of the ECB's monetary policy have had very limited effects so far:

• Currency depreciation has not boosted exports significantly

• Corporate profits have recovered, but it has not led to more investment

• Reducing interest rates have has very limited impact on credit because of the current level of indebtedness, the fact that companies mostly self-fund their own investments, and the weakness of investments in real estate

• New liquidity has not supported the real economy, the rise of asset prices do not seem to have triggered any ‘wealth effect’

For its monetary policy to boost growth and inflation in the eurozone, the ECB must support directly the demand for good and services, and not through ineffective intermediaries, writes Artus, before concluding: “The only solution is ‘helicopter money’: create money and distributing it directly to all households so they spend it; instead of buying assets.”

Despite its very relevant analysis, the briefing ends with a pessimistic note according to which “it is obviously clear ECB will never make use of this instrument”.

We think this is a premature conclusion. While all conditions are not yet currently available for the ECB to start such a programme, there is growing consensus on the need for this sort of policy, and possibilities to implement it under the current legal framework.

What is currently missing is political acceptance that the ECB’s toolkit should explicitly include direct monetary financing of public investment or a citizens’ dividend. Which is precisely why we are coming together to launch this campaign. Join us!

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