In Hong Kong, the authorities have already introduced “helicopter money”. US$1200 has been paid to every adult’s bank account. Clearly this would have been approved in Beijing, and I believe that we should consider this an experiment on behalf of the Chinese Communist Party.
In the US there appears to be bi-partisan support for payments of $1000 to every American.
The new Governor of the Bank of England, Andrew Bailey, argues that efforts by the Treasury to support household incomes will be vital. He also insisted that UK companies should think twice before cutting jobs and explore how the Government or the Bank can help them manage their cash flows.
If we proceed with overt “helicopter money”, then the Bank will probably be printing money to enable it to happen, but it would be in cooperation with the Treasury.
Yes, it would be the politicisation of monetary policy. But the circumstances require it.
Jim O’Neill, the well-known ex-Goldman Sachs economist, now Chairman of Chatham House argues that all citizens need income support. He suggests that “People’s QE” should be embraced as a coordinated G20 policy. (i)
Anatole Kaletsky, a former widely respected Times columnist, asserts that although it is too late to avert a health crisis there is still time to protect ourselves against an economic crisis. He suggests that governments should “guarantee unlimited fiscal compensation for lost revenues and wages”. (ii)
We are encountering a dramatic shock to economic demand, and so potentially to jobs, wages and spending. This is intensely deflationary.
In the past people have argued that such a policy is akin to the course of action which created hyper-inflation in the Weimar Republic or in Zimbabwe. In the current circumstances this is highly unlikely.
We are consciously asking people to stop going out, stop travelling, not go to their offices – in essence, curtailing all forms of normal economic life. The only ones not impacted are those who work entirely online, but even they have to buy goods such as food and, even if they order online, someone has to deliver it.
The time for “Modern Monetary Policy” or a “Universal Basic Income” seems to have arrived.
Policymakers already recognise the need for what I might call “Reverse Helicopter Money” – deferring or cancelling liabilities, such as business rates or taxes.
They should go further with this, strike a chord with our younger citizens and shatter the inter-generational divide by eliminating interest payments on student debt or, even better, writing it off in its entirety.
Now is the time to put money in peoples’ pockets.
Let’s get it done!