INTEREST rates are negative in much of Europe and Japan, and it may be a while before the Federal Reserve follows up December's quarter-point increase in rates. So that doesn't leave the authorities with a lot of room, in terms of altering the level of rates, to ease policy if another downturn hits.
One option would be "helicopter money" - the central bank could create the money to fund a fiscal stimulus, either by direct transfers to consumers* or by funding public projects such as infrastructure. The idea would be to stimulate demand and potentially increase inflation, which is below target in many countries. Martin Wolf of the FT recently praised the idea, and he hobnobs with the world's policymakers on a regular basis. The hedge fund manager Ray Dalio is another who thinks that helicopter money is the next option.
Why might this be helpful? The economist Simon...Continue reading
Source: Business and finance http://ift.tt/1pgrDWI
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