Imagine one fine morning you wake up and receive a text from your bank informing you that your account balance has been added 50 million VND, this is the amount that the government sends to all citizens. in the country to spend. That sounds far-fetched – but it’s true, and is being done in many countries around the world during the economic crisis. That’s helicopter money.
During a drought, it rains heavily, what is the first thing you will do with this money from the sky?, not all, but certainly most people go out on the street to shop and eat for food. satisfy the days of austerity because of the declining economy.
The concept of helicopter money (helicopter money) was seriously debated by economists a few years ago, and is back in vogue. That’s because despite the trillions of dollars, euros, yen and pounds that central banks have pumped into the global financial system since the 2008 credit crisis, global economic growth has been slow. once again.
In theory, helicopter money, given directly to consumers, would directly pull people into stores to spend, boosting confidence in the economy. That increased demand would allow prices to rise again, an important step because the price slide, known as deflation, is seen as creating the risk of a protracted recession.
What is the helicopter money policy?
Helicopter money is a term that refers to a type of aggressive monetary stimulus strategy to increase inflation, increase economic output, and increase purchasing power. Although this strategy seems theoretically feasible, from a practical point of view it is considered a non-traditional monetary policy instrument, which is hypothetical because it is difficult to implement.
In March 2020, the US Federal Reserve cut interest rates to 0% to combat the Covid-19 pandemic and the not-so-bright outlook for the world economy. This was followed by interest rate cuts by most of the world’s central banks, both to protect the economy and also to protect the national currency.
Since most governments are unwilling or unable to pursue fiscal stimulus by cutting taxes or increasing spending, there is pressure on central banks to go deeper into their toolkits for central banks. more unique policy tools than ever before. Helicopter money is back on the agenda as the central bank’s purchases of government bonds – a policy known as quantitative easing – have pushed yields in some bond markets down. low, so the scope to stimulate the economy by driving down borrowing costs is limited.
Origin of helicopter money
Nobel Prize-winning economist Milton Friedman introduced the concept of helicopter money in 1969. He envisioned a penguin flying over a field and dropping banknotes from the sky as an experiment to see If the increase never repeats in the money supply, what will people do to spend and save.
This idea brought Ben S.Bernanke to fame in 2002 when, as governor of the US Federal Reserve (Fed), he mentioned it while arguing that a central bank always has inflation can be prevented if necessary. He was immediately nicknamed “Helicopter Ben,” despite being a hero during the 2008 recession and one of the most successful presidents in Fed history.
In an April 2016 blog post, Ben said helicopter money could be the best alternative currency available in some extreme cases. In today’s debates, they have envisaged that helicopter money will be distributed either by crediting people’s bank balances or as tax breaks. The important thing is that it will come from a one-time creation by a central bank, rather than being borrowed or spent by the government.
Most recently, the US Treasury Secretary also mentioned this as a solution to save the US economy through the economic crisis during the Covid-19 pandemic.
Helicopter money advocates say it could be less risky than quantitative easing (QE), which has been blamed for fueling what is seen as a bubble in global stock and bond markets. bridge.
Opponents point out that helicopter money is not actually free. Printing more money reduces the monetary value of people holding savings in their accounts, in the same way that the more Bitcoin miners flush to the market, the more Bitcoin value will decrease in time. there. Conversely, the more Bitcoin is accumulated and kept in large wallets, the more its price will increase.
Others say helicopter money is an overly complicated substitute for government stimulus measures. Also, the danger is that helicopter money can trigger inflation much higher than 2%, which is a “nice” level for a growing economy.
What is Quantitative Easing (QE)?
Quantitative Easing (QE) English is Quantitative Easing, is a market behavior (usually performed by central banks) that increases liquidity and inflation, with the goal of stimulating the economy of the country. a country, prompting businesses and consumers to borrow and spend more.
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