‘Helicopter drops’ and the magic money tree…

“………….. governments need to deploy massive fiscal stimulus, including through “helicopter drops” of direct cash disbursements to households. Given the size of the economic shock, fiscal deficits in advanced economies will need to increase from 2-3% of GDP to about 10% or more. Only central governments have balance sheets large and strong enough to prevent the private sector’s collapse.

But these deficit-financed interventions must be fully monetised. If they are financed through standard government debt, interest rates would rise sharply, and the recovery would be smothered in its cradle. Given the circumstances, interventions long proposed by leftists of the Modern Monetary Theory school, including helicopter drops, have become mainstream……….”

 

Nouriel Roubini  Guardian 25/03/20

https://www.theguardian.com/business/2020/mar/25/coronavirus-pandemic-has-delivered-the-fastest-deepest-economic-shock-in-history

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