The european central Bank decided Thursday to continue beyond the scheduled completion date of march 2017, its policy known as “Quantitative Easing”, which is to introduce the currency of cool in the circuits, by buying bonds held by banks and other institutional investors (for more information, read The “Quantitative easing explained to a 5 year old child. Well, OK, 12 years old”).
The ECB injects this way 80 billion euros per month, but it will throw a bit of a walk from April : the amounts will be back to $ 60 billion. A lot of money for results that are hitherto disappointing : inflation is still low and activity in europe does not restart vigorously. The banks say that they do not have enough requests serious debt, and they place therefore this currency provided by the central bank on the markets.
A “very interesting concept”
An idea, yet, made its way and could solve the puzzle of the ECB : the so-called “money helicopter”. At the turn of a phrase, the president of the european central Bank, Mario Draghi had ruled last march that it was a “very interesting concept that has been debated among the experts”. The little phrase had sunk a lot of ink. The currency helicopter, it is the idea to distribute directly to economic actors (starting with the citizens) of the currency created by the central Bank, rather than the arrow shooter to the shifting sands of banking circuits.
Imaged, the expression was popularized by economist Milton Friedman in 1969, which did not find absurd that balance of banknotes from a helicopter. At least, they avoided the box for “State” and its distortions. In a letter written last month in response to a member of parliament Spanish, Jonas Fernandez, who interrogated him on the subject, Draghi is more than in march : he wonders openly on the legal feasibility of the thing. And in doing so, it shows that he thought about it.
Careful, he first takes care to specify how the issue has “never been discussed by the board of governors” of the ECB. And then he points out that such an operation would not be legally possible only if the ECB, which does not have the right to directly fund States, does not replace them. The key sentence :
“The legal complexities might arise if the scheme was perceived as the funding of a public-sector obligation in respect of third parties”.
According to him, it would be necessary to first determine what is within the tasks of the Member and which falls within those of the ECB.
of Course, the sentence of the letter Draghi may lend itself to various interpretations, as are often the words of central bankers. But for the advocates of the currency helicopter, grouped under the banner “QE4people” (Quantitative easing for the people), Mario Drahi made in this letter one more step in their direction.
A dividend money ?
Thus, for Stanislas Jourdan, who leads the campaign QE4people, Draghi considers now that “the currency helicopter is possible as long as it is a payment additional to the expenditures of the current budget”. What type of funding could enter this framework ? Response Jourdan :
“I do not see how this excludes a dividend a money transfers direct to bank accounts of citizens without going through the box government !”
many economists are willing to judge that the idea of the currency helicopter has nothing to absurd. The results of the QE are mediocre, and it may therefore be asked why the ECB persists in spending by the private banks… would it not make more sense to distribute this money directly to citizens or businesses ? The euro zone crisis continuing, inflation remaining at the floor, there are very few economists who find far-fetched the idea of “non-conventional”. The hundreds of billions of euros distributed by the ECB could, if they were better geared, change the economics. By the way, the image of the euro area and the ECB in the opinion would be that improved.
Draghi is clearly interested by the idea : in his letter, he did not reject the principle, since it restricts his questions to the legal constraints. The treaties prohibit the ECB from financing the public expenditure of the States, including “the obligations of the public sector in respect of third parties”, a phrase found in the letter to Draghi in mp Spanish.
The distribution of 1,000 euros (for example) to all the citizens of Europe, would come within the scope of this prohibition ? Draghi does not give the answer to this question, preferring to cultivate the ambiguity. In this way, it is a tribute to the famous axiom of Greenspan, dear to central bankers : “If you have the impression of having understood what I said, that is what I poorly explained”.