Thursday, May 28, 2020

Support For Dropping Helicopter Cash Takes Off

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The time for more governments to consider dropping helicopter money on households trapped in dire financial straits due to the coronavirus outbreak is with us, says financial experts.

Central banks are running out of weapons and strategies to counter the bottom falling out of the world economy as the deadly illness threatens to hold nations in the grip of fear for months to come.

Interest rates have been slashed and the austerity rule book torn up as governments pump billions into saving companies and jobs.

Not much room for manoeuvre is left.

Helicopter cash is one option and is just a step beyond quantitative easing to flood economies with money to buy some respite from recession.

$250 billion cash boost for families

US president Donald Trump is warming to the idea of giving every household a direct payment of at least $1,000.

The idea is the US Treasury will directly transfer around $250 billion to families.

Trump has not yet set a final figure on how much people will get, but his aides seem to favour the cash drop rather than payroll cuts as the money helps the unemployed and not just the employed.

The Belgium government is mulling a similar idea worth around €1,000 a family. The suggestion is to pay everyone 75% of their usual wage.

Helicopter money is a fiscal tool of last resort9 when interest rates are at zero and the economy is in recession.

Citizen’s dividend

Also known as a citizen’s dividend, the measure aims to give cash to everyone who will then spend the money rather than save.

Steven Mnuchin, the US Treasury secretary, endorsed the policy in a briefing from the White House standing next to Trump.

“Americans need cash now, and the president wants to get cash now. And I mean now, in the next two weeks,”  he said.

In the UK, much of the government’s economic stimulus has gone to support the business and workers, but the unemployed, non-workers like mums looking after children and the elderly are left to claim benefits.

Helicopter cash would be a much-needed financial boost for them and could make the difference between paying day-to-day bills or going without.

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