Have you ever heard of helicopter money? The term comes from an image the economist* Milton Friedman used to in a theoretical discussion of what would happen if you simply inject extra money into an economic system (whereby you would throw it out into the streets from a helicopter). There are several ways you could increase the amount of money, and one of them you will probably already have heard of, as it has been used quite extensively in recent years by central banks in Japan, US and Europe: quantitative easing (usually abbreviated into QE), meant to stimulate the economy.
This QE means that central banks buy gigantic amounts of financial products from commercial banks and pay for them by simply starting their money printing press to print extra yens, dollars or euros. At the moment of this writing, the ECB (European Central Bank) is doing this month after month, currently at a mind-blowing rate of 80 billion euro per month. The idea is to make sure the banks have more money to lend to individuals and businesses. But look at the news about the European economy. If you have to start using arguments like: “Without these measures, the situation would be even worse”, that’s actually admitting it’s not really working. (As a mater of fact part of the reason why it’s not working as well as intended it that fact that the ECB has at the same time been creating new rules for banks that turn out to actually cause banks to become not more but less inclined to lend money.)
There is, however, an other way to get more money into the system, if your goal is to get the money rolling. You can just give money directly to individual people. Not because they are entitled to it for having done some amount of work, but just like that. Each individual gets money – the only condition is being alive. This is closely related to the discussion about a basic income, which is in my view defintely an idea worth looking into quite seriously, especially as the coming decades will see an increasing amount of jobs no longer being performed by humans, but by machines (although I’m not as pessimistic about it as some doomsayers: other kinds of jobs will come into existence – a mere 200 years ago almost all of the world’s population was working in the production of food).
Setting up a large scale system of basic income and switching to it, is not really something that can or will happen any time soon. It’s too big a step. But why should we not start doing some smaller scale experiments? I have a very specific one in mind: as I mentioned earlier, the ECB is creating 80 billion new euros every month. Let us, for 1 quarter (representing 240 billion euro), not spend this on buying financial products from banks, but distribute it evenly to all Europeans. This obviously raises the question on how to define ‘Europeans’. The population of all countries using the euro? Europe as the list of countries participating in the European soccer championship or Eurovision songcontest (12 points from Tel Aviv and Canberra for that one)?
My suggestion: all member states of the EU – that way even the euroskpetics could no longer claim that EU-membership only brings disadvantages. That comes down to roughly 500 million people. As getting such a gigantic operation successfully organized will come at a considerable cost, I would suggest to take 2 monthly amounts to distribute (160 billion euro) and the remaining 80 billion to make it work properly. Which would mean something like 300 euro for each person. To spend which ever way (s)he wants. To Western-Europeans that might not sound like a lot, but please keep in mind that the idea behind this experiment is not to change things dramatically, but simply to find ways to get money rolling. And 300 euro could do just that: the lowest income group will most certainly spend it, for most of the middle class it will be considered a nice extra, but too little to use it in any long term plans (such as using it to pay back part of the mortgage), The top 1% would of course not care about 300 euro more or less, but in this case (being a mere 1%) they are actually quantité négligeable.
As an additional way to make sure the money is brought into circulation (and not added to a savings account), the ECB can create an ECB bank account for each individual and deposit the 300 euro there. The account comes with a card to pay electronically – cash withdrawals are not possible. At the same time, each officially registered business would get an account into which those electronic payments can be made. The businesses can then retrieve the money from their accounts at the ECB. You’re beginning to see why I’m reserving 80 billion to get it up and running, right? As you might also have figured out by now: traditional, commercial banks are not a part of this solution, but given their current reputation I’m not sure a lot of people will consider this to be problematic.
I’m sure a lot of practical objections can be found, but I’m confident that a bit of creative thinking can bring answers to all of them. Won’t there be fraude? Yes, obviously, and extra planning needs to go into preventing it (reward some small shop owners to think of ways to trick the system and then already build in countermeasures in advance). How on earth can you set up an ECB bank account for homeless people? Just set up a system of mailboxes for individuals – seems to be working fine for tax evading companies.
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*If you, dear reader, happen to be an economist: this blogpost contains huge oversimplifications, but you have to understand that there is a world out there with several billion people in it that have no clue what real economists mean in scientific economic papers (or even mistake the ridiculously elaborate formulas containing close to the entire Greek alphabet for mathematics)