Tag Archives: Helicopter money

Debt Monetization

On VoxEU, Refet Gürkaynak and Deborah Lucas argue in favor of helicopter drops to finance the fiscal burden due to Covid-19 and they propose an elegant way to implement such drops without undermining the central bank’s equity position (if regulators accept accounting tricks).

The special issue bonds would be zero coupon perpetuities and therefore would not obligate Treasury to any future payments. The legislation would require the Fed to buy these bonds from the banks at par. The bonds would then remain on the Fed’s balance sheet indefinitely. This monetises the special issue bonds.

“Geldpolitik soll eigenständig bleiben (Monetary Policy Independence),” FuW, 2016

Finanz und Wirtschaft, July 20, 2016. PDF. Ökonomenstimme, July 29, 2016. HTML.

In a perfect world, monetary and fiscal policy are coordinated. In the real world with its political frictions they are not. So much on helicopter money.