Columbia Threadneedle Investments case study

How Helicopter Money Works

Published by : Columbia Threadneedle Investments

Toby believes that once we understand how ‘money’ works, ‘helicopter money’ is straightforward. The issue then is, what effect might it have on markets?

His key points are:

  1. We equate ‘helicopter money’ with monetary financing. On an ex post basis, the UK, US and Japan can be thought to have experienced de facto monetary financing already, and it didn’t come with an explosion of inflation. The evidence doesn’t suggest that new helicopter money, if implemented, would spark inflation either.

  2. Monetary financing isn’t a wacky new policy and is easy to understand once you look at ‘money’ the right way. We should treat government debt and taxation as two forms of monetary sterilisation rather than financing operations.

  3. There are not clear advantages to announcing a policy of helicopter money over announcing a traditional debt-sterilised fiscal expansion. Indeed, it could end up being a backwards step.

Published:17 June 2016

Business Area: Investments

Type: Portable Document Format (.pdf)

Rating: 2 people found this useful


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