And here\u2019s Citi\u2019s Willem Buiter from Septemeber: \u201cHelicopter money drops would be the best instrument to tackle a downturn in all DMs<\/strong>.\u201d<\/p>\n So what exactly is this \u201chelicopter money\u201d that is supposed to provide a lifeline when all of central banks\u2019 other forays into unconventional policy have demonstrably failed? Well, here\u2019s Buiter to explain<\/a> how it works in theory (this is the China example, but it’s the same concept everywhere else):<\/p>\n Now whether it\u2019s \u201cfiscally, financially and macro-economically prudent in current circumstances,\u201d (or any<\/em> circumstances for that matter) is certainly questionable, but what\u2019s not<\/em> questionable is that it is indeed feasible.<\/p>\n How do we know? Because we\u2019ve been doing it for 8 long years.<\/p>\n If you think about what Buiter says above, it\u2019s simply deficit financing. The government prints one paper liability and buys it from itself with another paper liability that the government also prints.<\/strong><\/p>\n Sound familiar? It\u2019s called QE.<\/strong><\/p>\n The only difference is who the bonds are bought from. With QE, the central bank buys in the secondary market in an absurdly transparent attempt to pretend like there\u2019s some degree of separation between the central bank and the government.<\/p>\n In so-called \u201chelicopter money,\u201d the central bank simply drops the bullshit facade (pardon the language) and buys directly from the government. But it\u2019s all deficit financing. Need proof? Just compare changes in government deficits to the changes in bank reserves (i.e. where QE shows up) as shown in the table below<\/strong>.<\/p>\n Below, find a hilariously frank assessment from Deutsche Bank who basically asks, \u201cwhy are we even talking about this as though we haven\u2019t been financing deficits for years?\u201d<\/p>\n * \u00a0* \u00a0*<\/p>\n From Deutsche Bank<\/em><\/p>\n The argument that monetary easing has run its course and it is time to enact fiscal stimulus is starting to be heard around the world. The most eye-catching of such views is a call to deploy \u2018helicopter money\u2019, which we define as monetary financing of fiscal deficit. However, this argument is misleading. Surely this has already been implemented in many developed countries through QE. Why bring it up now despite it has been already deployed?<\/strong><\/p>\n Figure 16 compares the cumulative central government fiscal surplus\/deficit of developed countries over 2008- 15 (A) and the cumulative increase in the bank reserves portion of the monetary base (= almost the equivalent of the BoJ current account; (B)) over the same period. In Japan, for example, the cumulative increase in fiscal deficit for this period reached \u00a5225trn, while bank reserves increased by a cumulative \u00a5239trn. Thus, the increase in bank reserves exceeded the total fiscal deficit and the degree to which monetary policy financed the fiscal deficit (B\/A)*(-1)) reached 106% (more than 100%).<\/strong> All the other countries, excluding Australia, Canada, and Norway, are already implementing on a set scale monetary financing of fiscal deficit, albeit not on the same scale as Japan. The degree of monetary financing is 82% in Sweden, 60% in the UK, 35% in the US, 26% in Denmark, and 16% in the Euro area. The most extreme case is Switzerland, where despite a fiscal surplus, the central bank has increased bank reserves 13.7 times greater than its fiscal surplus. Helicopter money has already been deployed in many countries. The reason that inflation is not rising in these countries despite helicopter money is that the currency (or monetary) regime has changed from a fiat money regime to a de-facto quasi-hard currency regime, the latter of which does not allow credit creation. Naturally, expanding the scale of helicopter money is possible in most of the countries.<\/p>\n\n
![\"\"](\"http:\/\/www.zerohedge.com\/sites\/default\/files\/images\/user92183\/imageroot\/2016\/03\/06\/DBHelicopterMoney_0.png\")
<\/a><\/p>\n