Money “by helicopter” to boost growth after the coronavirus ?

De l’argent «par hélicoptère» pour relancer la croissance après le coronavirus ?

The crisis of the sars coronavirus has reignited the debate about the use of money ” by helicopter “, or ” parachuted “, to support the economic recovery after the sars coronavirus, that is to say, the payment of sums in cash directly to consumers so that they spend it quickly.

The image of the United States, which included a cheque for $ 3000 to a family with two children in their recovery plan, or Hong Kong, which pays over 1000 euros for its residents, some States have already resorted to this remedy non-conventional to the exit from the crisis.

A few elements to better understand what it is.

What is the “money helicopter” ?

The american economist Milton Friedman, considered one of the fathers of neoliberalism, has launched the expression “helicopter money” in the 1960s. The Nobel prize-winning economist wanted to bypass the channel in the usual transmission of liquidity between the central banks, which create money, and traditional banks. “As the monetary policy is not always effective, and the budget either, because there are many intermediaries, his idea was to be fed directly to the consumer by providing him with a sum, or monthly,” said AFP Philippe Waechter, chief economist at Ostrum Asset Management. Buying goods with this money, the consumer would have, theoretically, a faster effect on the economy.

How much money would it be distributed ?

There are two main options. The central bank could first of all should be paid directly the money on the consumer’s behalf. The State could also issue cheques to its citizens, in the form of bonuses, for example, or by adopting fiscal measures. It is refinancerait subsequently with its central bank, so that his indebtedness is not increased by the measure, as provided for in the concept, developed by Friedman.

Why the debate is re-launched ?

After the 2008 financial crisis, central banks have intervened massively to stimulate the economy by purchasing large amounts of public and private debt and lowering their interest rates at record lows, passing in some cases into negative territory. “With the exception of people that have taken advantage of low rates to buy real estate, the direct and immediate impact of the accommodative monetary policy on the consumer has been practically non-existent,” said Mr. Waechter. States, and economists are wondering when the need to use the money “parachuted in” after the sudden stop of the economy by the coronavirus so that the recovery will be as fast as possible.

Why this device is-it debate ?

Beyond the technical difficulties for a central bank to pay money directly to consumers, economists are not agreed among themselves on the results of this measure, and some doubt that a decisive impact on consumption. If a time limit is not imposed on the consumer for as he spends that money he could spare, and the measure would not have the desired effect.

In addition, the situation is different in different countries. In the case of the United States, for example, the money promised by the State could be used first to compensate for the medical expenses incurred or loss of employment, as pointed out by the chief economist of the OECD, Laurence Boone, on BFM Business. “The social security system in american has nothing to do with the one in Europe,” she recalled, referring in particular to the use of partial unemployment in the countries of the EU, which allows to avoid compulsory redundancies until the recovery. “As the Americans don’t have it, it is absolutely necessary to make direct transfers in cash “, she pointed out, implying that the EU countries had a priori no need to resort to this measure for the moment.

The French economist Jean Pisani-Ferry considers that the question does not arise for the moment. “The consumer is being forced today’ by containment measures. “Expect to see more clearly “, he told AFP.