The monetary helicopter returns? ECB ready to distribute 200 euros to a citizen

October 23, 2019 – Can helicopter money help Europe take off? The hypothesis of credit 200 euros per month according to experts, each eurozone citizen may not be so remote. To support it is, among others, a recent study published by Kristina Hooper, Invesco's Chief Global Market Strategist. According to the Report, supplying cash directly to citizens and businesses or supporting direct investments in infrastructure by the central bank could prove to be so most effective tool in a context characterized by the absence of adequate fiscal stimuli. A kind of Hybrid Monetary / fiscal able to reactivate the application.

A study of the Congressional Budget Office he said, "he said for every dollar committed a return to the economy of 1.8 dollars.

Coined from famous economist Milton Friedman in 1969 to describe the central banks' introduction of money into the economy, the term "helicopter money" was later revisited by Ben Bernanke in 2002. Bernanke presented this hypothesis as one strategy to prevent deflation. And this is precisely the aspect that could bring the European Central Bank to concretely evaluate this hypothesis since, for 10 years, the ECB has been unable to raise inflation bringing it closer to the 2% target, staying on one 1.2% average. A perspective that, from now to the next 10 years, second the Eurozone inflation 5y5y index, does not seem to improve.

Irish economist Eric Lonergan in the Financial Times stated that central banks consider helicopter money a valid alternative to cutting interest rates. In this sense the measure could, therefore, take the form of a sort of "Quantitative easing for citizens".

Started as an abstract economic theory, helicopter money started to become a concrete hypothesis starting from 2016. In particular when Mario Draghi defined it during a press conference at the ECB, "A very interesting concept".

A simple explanation of why helicopter money could work is provided by Hooper itself. "Central banks can inject liquidity into the economy and lower interest rates but cannot make sure that people actually spend the money. In other words – explains Hooper – monetary policy, as the well-known English proverb says, can bring the horse to water but cannot make it drink. With helicopter money, on the other hand, central banks could be able to "Let the horse drink" spending money on projects, such as infrastructure, that can push the economy or depositing money in the accounts of citizens with an expiration date for their use so that they are forced to spend it.