Central Bankers are Revving Up the Helicopters
Back in 2002, Ben Bernanke, who at the time was advisor to then-Fed Chair Alan Greenspan (and would subsequently go on to succeed Greenspan as Fed Chair in 2006), gave his first speech as a Fed Official.
The speech was titled: Deflation-Making Sure “It” Doesn’t Happen Here.
During his speech, Bernanke advocated that if the U.S. ever found itself in a situation in which interest rates were zero and the economy was entering a recession, the Fed should just start printing money, then funnel it directly into the economy by either:
- Directly financing government budgets.
- Paying money directly to citizens.
The concept became known as “helicopter money” because it was metaphorically the same thing as the central bank simply dropping money out of a helicopter in the sky to the people on the ground below.
Regarding #1, in this circumstance the central bank would simply print money and then use it to pay for the U.S. government’s budget. Currently the budget is financed by a combination of taxes and debt issuance. With helicopter money, the government could effectively spend as much as it wants because the Fed would simply print money to pay for it.
Regarding #2, in this situation the Fed would print money, give it to the U.S. Treasury, which would then mail Americans’ checks. The idea here is that Americans would go spend this free money, thereby kick-starting the economy.
The whole thing sounds ludicrous, right?
Well, three former central bankers just wrote an article calling for exactly this as soon as the next downturn hits…
The Blueprint for What’s Coming during the Next Crisis
These central bankers are:
- Philipp Hildebrand: Former head of the Switzerland’s central bank.
- Stanley Fischer: Former vice-chair of the Federal Reserve
- Jean Boivin: Former Deputy Governor of Canada’s central bank.
Put simply, these are three HIGHLY connected and influential former central bankers. And they just wrote an article for Blackrock – the largest money management firm in the world – calling for central banks to use helicopter money during the next downturn.
This is as close as you can get to a blueprint for what’s coming in terms of central bank policy.
I know it sounds insane – but then again, back in 2000 if you’d said that the Fed could cut interest rates to zero, keep them there for seven years, and perform $3 trillion in Quantitative Easing, you’d have sounded insane too.
And all of that has since happened.
At the end of the day it all boils down to this question…
Which is more likely: for the Fed to implement helicopter money or for the Fed to admit it has no idea what it’s doing?
The answer is obvious: helicopter money.
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Editor, Money & Crisis