Helicopter Money "The Next Step"
Duncan Richardson, News Editor
14 Jul 2016, 11:24 a.m.
After eight years of zero interest rates and endless rounds of money printing, central banks are now openly discussing so-called helicopter money. Helicopter money is where money is pumped directly into the economy and not through the banking system.
The Japanese central bank could be the first to pull the trigger. After printing trillions of Yen, the economy is still experiencing low growth and deflation. With options running out the Bank of Japan may be forced to literally hand money out to the Japanese population. Expectations are rising that the Bank of Japan is poised to unleash a 10 Trillion Yen stimulus package.
It appears the Federal Reserve may not be too far behind. President of the Cleveland branch of the Fed, Dr Loretta Mester, signaled the Fed may be prepared to inject raw money into the banks accounts of ordinary people in an attempt to boost spending and demand in the economy.
Even Fed chair Janet Yellen confirmed the Fed would be prepared to hand out money if the situation became extreme enough. With traditional monetary policy failing central banks have few tools left in the tool box. In a system which requires the monetary base to continually expand, printing raw money may be the last option available.