If penalty interest and no longer help bond purchases, the ECB has a last resort in order to stimulate the economy: with so-called “helicopter money” they might miss each citizen a cash injection. FOCUS Online says how the trick is – and why should not
Instead of helicopter money you could also say “windfall”.. Because it means that the European Central Bank (ECB) each citizen gives money instead to pump it through the purchase of securities in the markets. It would be the last resort, the ECB could occur when their other instruments – for example, penalty interest and bond purchases – no longer function
Whether the idea would work in practice, as desired, is indeed controversial.. But the execution was simple: The central bank has a certain amount of money to the account of every citizen The hope of the bankers would be that citizens spend it right away the money – and so stimulate the economy
Transfer is not the only way for helicopter money
In addition to direct payment there would be other ways in which the ECB could distribute helicopter money:
– tax credits
the government could reduce the printed money taxes or citizens crediting taxes. During the 2008 financial crisis, the US has tested this method for the first time. At that time the government distributed tax credits. The action cost 150 billion US dollars.
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- gifts of money to the government
Instead of the citizens could the ECB the money to the Member States remit. These could then invest in roads, kindergartens and other major projects and thus stimulate the economy - very similar to the German stimulus packages. But that money would not federally but by the ECB
-. money to the banks
The German economist Christian Odendahl the Center for European Reform in London will not give the states the money, but the commercial banks, reported the "Welt am Sonntag". The ECB should buy up their debt. Institutions would the money not repay when it pass on the cash injection to their customers.
"A helicopter-launched is long overdue"
The ECB seriously obviously thinks about the employ trick by helicopter money. It is a very interesting concept, which was currently being discussed in academic circles, said ECB chief Mario Draghi last week. "We will watch that," he added. However, you have not thought or talked about in the Central Bank.
Support receives Draghi among others the former chief of the British Financial Services, Adair Turner, and by former US Federal Reserve Chairman Ben Bernanke. Also Willem Buiter, chief economist of the US banking giant Citi is enthusiastic about the idea. "A helicopter-launched is long overdue," he said.
"Massive redistribution"
However, especially in Germany already stirs resistance. Money gifts to the citizens are "a highly political decision" that would make governments and parliaments, Bundesbank President Jens Weidmann told the newspapers the Funke Media Group on Saturday.
Weidmann monetary gifts for cranking the economy strongly. "The central banks have to a mandate, not least because this connected a massive redistribution would," he stressed. "Instead of bringing ever more daring monetary experiments into play, it would be useful, even pause," said Weidmann on. "Monetary policy is not a panacea, not replace necessary reforms in each country and also does not solve the growth problems of Europe."
"That, helicopter money 'is nonsense"
Also, the chief economist at Berenberg Bank , Holger Schmieding, commented dismissive: "That, helicopter money 'is nonsense," Schmieding said. it was not necessary Economically and politically it would thus create a dangerous precedent. "It would foster the illusion that the Fed could for citizens simply print more money and thereby solve the problems."
In the ECB, however, one thinks evidently common to the helicopter money than it would Draghi might admit. Even ECB chief economist Peter Praet has already commented on this - and shown that he basically is the measure open to. Theoretically, all central banks use this "extreme instrument," Praet said in an interview published on Friday the Italian newspaper "La Repubblica". It only raises the question of whether and when the application actually makes sense.
million current accounts cost money in the future
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