Get ready to be showered by helicopter money

Image: Socio-Economics History Blog
Image: Socio-Economics History Blog

You’ve been warned for the better part of a decade that it was coming. Now get ready. Manna from heaven. (Well not from heaven.) Free money. It’ll be like that movie “Cloudy with a Chance of Meatballs” only instead of pizza falling from on high it’ll be cash! Oh happy day. I am already dumping the cisterns out so I can get as many of those greenbacks (if they aren’t outlawed) as I can. All bets are off! Here it comes. No way anything could go wrong with this scheme. No way!

(From The Telegraph)

First we had Zirp. Then Nirp. The language of central bankers sounds increasingly like the formal medical term for a nasty rash. We have already grown used to a zero interest rate policy over the past year. Over the past few months we have been gradually softened up for a negative interest rate policy.

Both now appear to have run out of road. Zero interest rates are not doing enough to stimulate flagging economies, while negative rates, by destroying the profitability of the banking system, may well do more harm than good. But don’t assume that will stop central banks trying to stimulate demand and raise inflation. The next likely option is “Hirp” – or helicopter money. And that is likely to involve some even crazier options, such as putting money into people’s banks accounts, mandating pay rises, or giving them the deposits for a house. None of it will work, of course – but that doesn’t mean we shouldn’t expect it to happen, or indeed position our portfolios to take advantage of it.

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