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Now that zero interest rates, Quantitative Easing and negative interest rates have failed, should the world's central banks start printing money and handing it over to real people? Bernard Hickey takes a look

Now that zero interest rates, Quantitative Easing and negative interest rates have failed, should the world's central banks start printing money and handing it over to real people? Bernard Hickey takes a look

By Bernard Hickey

Just imagine that one day the Reserve Bank deposited NZ$1,000 in your account, along with every other citizen in New Zealand.

It sounds downright crazy, yet it's something that some central bankers are talking about in a crazy world of deflation, negative interest rates and much slower economic growth for much longer than anyone expected.

This idea is called 'Helicopter Money' and it's suddenly the hot topic in the sometimes arcane and always sober world of central banking. It's a truly radical idea that would seem utterly irresponsible and dangerous in normal times. It's the sort of thing we used to think only Robert Mugabe would do, and it would inevitably lead to everyone pushing around barrows of cash to buy bread.

It's even more 'out there' than the suggestion from Russel Norman in 2012 that the Reserve Bank lend money to build infrastructure in Christchurch. 'Helicopter Money' would see everyone get a big dollop of freshly invented money to spend on cigarettes, booze and a trip to Rotovegas if they saw fit. It seems to break all the rules about economics, let alone of politics in a world where means testing and work-tested benefits are the convention.

So what is 'Helicopter Money' and how has it come to this?

Its modern genesis came in a speech in 2002 from Federal Reserve Governor Ben Bernanke. Speaking as Japan was grappling with deflation, he said one option would be for a central bank to finance a tax cut for everyone -- a so-called 'Helicopter drop'. This term was invented by the godfather of monetarism, Milton Friedman, in 1969. He used the parable of dropping thousands of newly printed $1,000 bills onto a city from a helicopter to show how the immediate boost to spending would increase inflation and output in an economy that was underperforming and suffering chronic deflation.

It all seemed an academic exercise that made for a great lecture and very poor economics and politics.

Until now.

That's because the world's biggest central banks cut their interest rates to almost 0% during the Global Financial Crisis. It helped avoid financial armageddon, but proved ineffective in restarting the engine of growth. They then bought US$7 trillion of government bonds to drag down long term interest rates in a process called Quantitative Easing. That helped unleash big jumps in stock markets and property markets, but again appears not to have reversed a steady fall in inflation and stubbornly low economic growth. It made a few people much richer, but much of the money has ended up back in bank accounts because rich people save most of their money.

In desperation, four European central banks and Japan have now cut their interest rates for bank deposits to negative levels. That means banks pay the central banks of Switzerland, the Euro zone, Sweden and Denmark to look after their money. Almost a quarter of the world's economy now has negative interest rates. The theory is it will force the banks to lend the money out and encourage people to spend rather than save.

But it appears this apparently last resort isn't working either to boost their growth and inflation rates. Europe's prices fell unexpectedly in February and Japan's negative interest rates had the worst unintended consequence -- nervous Japanese investors pulled their money home and pushed up the yen. That makes Japanese exporters less competitive and worsens the potential for imported deflation. Many investors worried it would also further undermine the profits of already weak banks because they were unable to pass on these negative interest rates to their own customers.

So here we are at the ultimate last resort -- printing money out of thin air and giving it to real people to spend on real goods and services, rather than just buying assets and putting the proceeds in the bank.

Late last year the former chairman of Britain's Financial Services Authority, Adair Turner, recommended something similar. He suggested monetary financing of Government deficits, which means the central bank prints money to lend to the Government to spend on new infrastructure or tax cuts or whatever it feels like. This is more like the Russel Norman suggestion.

The other one is that the central bank simply pay the freshly invented money into everyone's accounts. This is classic helicopter money without the actual helicopters. It would be fair and have an immediate effect because much more of it would go to poorer spenders, rather than richer savers. Central banks also don't have to get elected so could do it without the pesky political issues of who deserves the money and who doesn't. Anyway, many argue the world is in such an economic mess because politicians could not get their political act together to reform their economies and fix their broken infrastructures with Government spending. So why not give the job to a bunch of technocrats.

No one is suggesting this is appropriate for New Zealand any time soon. Our Reserve Bank still has another 2.5% of interest rate cuts to go, and is expected to signal a few as early as this Thursday.

But Helicopter Money is now being actively discussed in the Northern Hemisphere and as we've seen over the last decade, where they go, we often follow.

A version of this article first appeared in the Herald on Sunday. It is here with permission.

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I think its extraordinary that you didn't mention or analyse what happened when Australia did it (so recently)!!!
Sure, in your defense, it wasn't massive.

EXACTLY what I was thinking.


I know about the Australian payment, but it's not helicopter money. It was from the Government using borrowed money, rather than freshly printed money.



The $900 cheques that lower income Australians got provided a big spending boost in the local economy. It worked but a lot of financial journalists and commentators are ignorant of it. I've even found articles saying that it hasn't been done for a very long time.

If you need inflation the money should just be printed and given to people rather than generating an expense or debt. It's a good thing when it's needed and works better than giving money to people who don't need it.



In my mind introducing negative interest rates is a criminal act by the Central Bankers.

One of the main outcomes of GFC1 was that banks should stop reckless lending(and strengthen their balance sheets) and now as we enter GFC2 they are actively encouraging them to lend as much money as possible so that it causes an inflationary environment on the street to stave off a global depression.

In many ways they are trying to get the man on the street to leverage up to prop up the global economy. Irresponsible.

"The theory is it will force the banks to lend the money out and encourage people to spend rather than save."

Stupid theory, as you say. The purpose is to lower the exchange rate but they are not allowed to say that due to international agreements.

smells of Desperation. Then they didnt fix the banks, assuming that after the oopsie there would be a recovery back to BAU and no one would remember the GFC in a few years.

Wrong, wrong and wrong.

Certainly in Queensland most went straight through the pokies.

No one is suggesting this is appropriate for New Zealand any time soon. Our Reserve Bank still has another 2.5% of interest rate cuts to go, and is expected to signal a few as early as this Thursday.

Is that so?- maybe you can position yourself in the bond market to make a bit off the back the NZ depositors underwriting the TLAC of our Australian owned banks. Shorting both the rumour and the fact is probably the best. at this juncture.

No mattter the rate and quantity of helicopter drop it will always be gathered up to underwrite further bank debt creation in the form of unsecured asset issuance, voluntarily or otherwise. Governments need asset chains in some form or other to balance created liability ledgers.

More like the financial parasites do...

It is probably normal for this time of the year, but all the social welfare benefits (excluding Super) have just had a decent rise. Is the governments already doing a bit of this in a way that is targeted at the wealth disparity?


It is now perfectly clear to anyone who thinks things through that consumption is the problem, not the answer.

The reason the global economic-financial system has hit the wall is past consumption -of coal, oil, minerals, forests, fish and other resources. All the high quality, easy-to-extract sources were consumed long ago, and the world is increasingly dependent on ever-declining -both quality and quantity- sources of the aforementioned.

In addition, we no longer have climate stability.

Rather than face reality, bankers, governments, economists and their acolytes come up with ever more bizarre schemes to prop up their dysfunctional institutions, and in doing so exacerbate every aspect of the predicament we are in.

The latest scientific data indicate none of what most people focus their attention on will matter at all fairly soon. The meltdown of the planet has been accelerating for some time and has almost certainly entered a highly disturbing (and soon highly disruptive to economic activity ) super-fast phase.

Through the early weeks of 2016 the Arctic ice area has been consistently below historic normal levels, and is currently melting at an unprecedented rate.

The prime cause of this meltdown, atmospheric CO2, is at a record high, and will continue to increase in concentration in the atmosphere (and oceans) until it (and other greenhouse gases) render the Earth uninhabitable.

The time frame for the Earth to be rendered uninhabitable by the present economic-financial system gets shorter every day the system continues to operate. The preposterous suggestion of stimulating consumption -which is all we normally hear from politicians, economists and central bankers- simply shortens the time frame for rendering the Earth uninhabitable.

We are living in the most idiotic period in all of human history. And our children/grandchildren will pay the price for the institutionalised idiocy that currently prevails.

Best would be to get the companies to increase the wages across the board and also increase welfare payments and to compensate the companies/government by tax cuts/budget support. This way increased purchasing power will be an ongoing thing, instead of just one shot affair which may not be very effective long term. Just a short spike and then back to the drawing tables ?

Exactly - others have noted the same in the US - Read more

with high immigration wage inflation is kept in check as big companies have a steady supply

The related issue is to get households to spend any additional income.
Since 2009 many household and consumers are more likely to save than spend due to a lack of faith in future economic stability.

What about using 'helicopter money' to pay down debt? Steve Keen debt jubilee idea . So everyone gets the same money -but on the proviso that debt in the first instance is paid off- before the money is used for consumption.....

Totally agree Brendon... equitable..and a form of deleveraging... ( 2 birds with one stone ) I think it is a brilliant idea..

doesn't the money just disappear? The only advantage would be slightly lower interest payments.

Any chance you might confirm the mechanics of such a distrubution of key stroke wealth out of thin air?
Do you anticipate a legacy liability on the RBNZ balance sheet and what would constitute the offsetting asset?

No idea how the nitty gritty mechanics of the a debt jubilee would work. I just raised it as a theoretical option if we hit the zero-bound deflation problem. I was hoping someone could enlighten us with the practical details.

Have followed Steve Keen's utterings on Debt Jubilee but he doesn't explain how you deal with the inequity of forgiving the debt of borrowers versus debt-free savers who have no debt - be interested in how that works

Forgive me if I am inaccurate here, but I think that the precedent set in the bible was a rule designed to overcome the predatory behavior of the creditors. But the problem is the debt jubilee doesn't change the the system, or the direction it is headed in. It only changes the time it takes to get there.

Ionclast.. here is where steve explains it

he says :

A Modern Jubilee would create fiat money in the same way as with Quantitative Easing, but would direct that money to the bank accounts of the public with the requirement that the first use of this money would be to reduce debt. Debtors whose debt exceeded their injection would have their debt reduced but not eliminated, while at the other extreme, recipients with no debt would receive a cash injection into their deposit accounts.

- See more at:

Thanks - feel much better now

Don't get complicated Stephen...

In the same way a counterfeiter prints money... there is no offsetting asset or legacy liability.... in a practical, realistic sense.. ( printed money is a liability to noone.... especially not to the "counterfieter" )

I know that currency shows up as a liability on a Central Banks balance sheet.... but thats' a throwover from when currency was a claim on gold.
In todays "Fiat" world.... currency ( Outside money ).... is not a claim on anyone.... ( therefore, realistically , there is no counterbalancing liability when it is "printed" .)

A liability on a balance sheet is a "debt".... If A Central Bank "prints Money".... whos does it become indebted to by printing that money..???

Credit money is different.... It is an "IOU".... therefore its' creation results in both an asset and a liability on the balance sheet ..

What do u think..??

ps.. In my view ..If one has a need for money printing to be properly accounted for ...then the proper place for "money printing" might be on the profit/loss acct of a Central Bank.... and then transferred to the Balance sheet as.."retained earnings"... ( just in the same way a gold producer would do it )
ie... It "manufactures" or "Creates" the money.
The exchange value of money less its "cost of production" = Profit..

( a great business to be in... if one has the " privilege" of being able to do so )

Where do you see interest sitting in this scheme? Both past and future?

That was my though - however I think all that would happen is it would temporally kick the can down the road (for a month or two). NZ (and the rest of the world) has to suffer the pain of the situation that we now find ourselves - to quote Negan from the Walking Dead - "If you have to eat shit, best not to nibble. Bite, chew, swallow, repeat. It goes quicker."


trickle down economics should start working any day sure of it!!

“Trickle-down theory - the less than elegant metaphor that if one feeds the horse enough oats, some will pass through to the road for the sparrows.”

― John Kenneth Galbraith

Seems like a good idea to me. It is clearly a fairer way of putting new money into circulation than by creating inflation. Money has value partly due to the cooperative achievements of the society that issues it. Inflation benefits those with debts as it reduces their value so we currently have a system that favours high earning Auckland lawyers with big mortgages and penalises people who save. We just need to figure out the institutional framework needed to do it responsibly.

From where I stand, if the responsibility for the value of money is in the independent hands of the RBNZ then we might be much better off using this system and aiming at 0% inflation instead of 2%. There will be unintended consequences which will need sorting out as we go along, but that is a pretty weak argument for not trying something new. The trick with trying new things is to try them in a low risk way. $1000 per citizen of all ages sounds like just that.

As regards when to try it, why not try it now? The RBNZ is clearly unhappy putting interest rates down any further and fueling the Auckland house price bubble monster to even higher levels of insanity and we have 0% inflation already. The Aussies tried it successfully in 2009 or thereabouts so it's not untried and dangerous. It just favours citizens over bankers.

End the debt based money system go to a gold backed or similar system and start a universal income system.

Drive up the value of savings in money instead of driving down the cost of debt.

unfortunately in a centrally planned economy like the west we will sacrifice many lives before we admit any sort of mistake.

And Bernard do you think responsibility for the mess we are in just falls on the lap of politicians? They have been getting advice from the very people you think could solve the problem.

Oh and a debt jubilee to cover the fall in house prices.

Aucklanders only get 50% of the helicopter $$$, while nonAucklanders get 200%!

Except Aucklanders don't know it yet but they will be poor.

Yea Aucklanders locked out of housing and paying climbing rent sure are creaming it, how dare they get a break!

Central banks might quite suddenly change peoples preference for assets over currency. Consumers might spend to get rid of all their cash. Producers might tolerate decreasing revenue by increasing their prices rather than converting all their stock to cash. If GDP does down and prices go up is that a good outcome?

So how did this approach from BE in 2010 work out? I suggest looking at the GST rate as a good option.

Mr English said the budget delivered the biggest reform of the New Zealand tax system in decades.

“Across the board personal tax cuts and a package of other tax changes will help boost economic growth, make the tax rules fairer and help hard-working Kiwis get ahead under their own steam,” he said.

For too long, New Zealand has relied on investment property speculation, rising debt and increases in government spending we could not afford..."

How are we not printing money and giving it to people already? Savings is a fool's errand, the increase demands on first home buyers already put investors ahead of them and interest rates are so low for borrowers that those who can afford to take on debt (i.e. those who have the advantage of interest being tax deductible) are creaming it at everyone else's expense? All of the things listed have already flowed through to real people, but not the people who actually need it.

All the economic geniuses in the world have lead us to this point. Having run the economy into the ground, they are contemplating resusitation in order to funnel more wealth into the greedy hands of the already uncromprehensably wealthy few.
To what end? What problems are you solving? Is our biggest problem, that people are all short $1000? If only everyone had an extra thundy all our problems would be solved. Are there structural problems that everyone is too weak to even mention? Are there real reasons why some people have no money to spend? Obviously giving the rich more money will do absolutely nothing for anything because they have more money then they can spend already.

Reading all the threads here, most are considering the pitfalls and superficial benefits, but one (Bad Robot) hits the nail on the head. While superficially attractive, mostly because it will help the victims of the banks drive to generate debt, and therefore their power over society - in other words the common people of the middle and lower socio-economic classes, however any outcome will at best be only temporary. At worst it will dramatically escalate expectations of those in reciept (first line) of that money. Without direction the vast majority of that money will be wasted. Any helicopter effort will need to produce jobs, revenue for companies and tax income. ut for these to be sustainable the free trade model needs to be wound back some in such away so as to ensure jobs are protected. This means undermining the power of not just the banks, but multi-national conglomerates too. Governments must get back to serving the people who elected them, not the rich and powerful.

Here's what I know> Nothing will change until way way ....too late. Nothing will happened unless political hands are actually forced by a catastrophic economic event. Why? because our political process has become so entwined with corporate greed and the desire for the status quo to never change, that our so-called 'leaders' who generally benefit the most will never act unless made too when faced with a real crisis.
Economic oblivion is inevitable I feel.
I think deep down we know this to be true. Our discussions on here, though thought provoking, merely serving as a rational thought process for the optimist in us all who hope at all costs someone.... or something will set things straight. The system is so bent from corruption on every level now that hoping for the 'right thing/s' to be done seems rather naive to say the least. I hope I wrong (optimist) but the realist in me

Fait Accompli, but I would contend only the smartest can see it. The average talk of ifs and buts, the smart ask how and when.

By printing money we could try to get artificial inflation, so that the milk price, and rents could go up to try and make the land and property bubbles look like real value, and this would save the world from bank failures due to a 50% drop in asset values.

No Bernard. Helicopter is a dorky idea. Money is just a means of exchange and please leave it that way. When the clever start to play about is when we get problems. These failures love acronyms. "ZIRP" for crying out loud.
This discussion avoids the hard stuff. Productivity, efficiency and the real hard thing which is how to ensure folks retain ownership and the benefit from what they do.

Fully agree KH.....maybe BH was denied access to lolly scrambles as a child!

I see three major problems
1 its very short term
2 how do you make sure the funds are spent in the NZ consumer economy
3 a lot of the funds could go into asset inflation

Sounds like the "Can" that got kicked down the road in 2008 is so far from home and out of shape its in entirely new unrecognisable territory. The only thing that seems reliable is economic history from the turn of the century, the 20th century.

This could easily be achieved through the PAYE system - simply double the IETC for the next 12 months (currently $520 per year). Targets those not already receiving a government handout

"... in the Northern Hemisphere and as we've seen over the last decade, where they go, we often follow." Oh, really? I though "we" are a proud and independent Asia-Pacific nation that urgently requires a bath towel for a flag to express itself? But, ok, at least economically we will probably keep aping other countries' inapt policies.

I think that the deterioration of the financial architecture of the world (for me "NIRP" is just taxation without the democratic process of passing a law for it) is just part of a much wider decline of democratic processes and the rule of law. "Moral hazard" has turned into definite negative outcomes.

Immigration, as we all see, is now beyond the reach of democratic decision making. The political establishment in all large Western nations is for it, the media tell us how immoral it is to be against, so we just go on with it towards social disaster. Central bank policy is in breach of its mandate and purported political independence, openly doing the dirty work of the political establishment. That establishment is as removed from its constituency as it can get and does not care, as long as a complicit media establishment sells its ongoing failure as the opposite. The list goes on ...

Signs that our rotten system is on its last legs abound. Anti-politician Trump is about to rip up the corrupt system in the US. The EU is grovelling to a Turkish dictator because, for all its false niceness, it wants someone else to keep illegals from crashing the gate. And closer to home, Key and Turnbull stand for dark matter, politics deviod of substance and innovation, flogging economic models that are dead horses.

Should have stayed honest during the GFC, all of us, and let bankrupt corporations, banks and countries go bankrupt. That would have upheld the rule of law and allowed proven capitalist market processes to replace failed "elites" with hopefully something better reinforcing the concept that doing the wrong thing gets punished. We chose not to and have thereby pulled the rug from under the feet of our civilisation. Now we are descending into the same instability, disorder and squalor that has so far been more characterisic of the 3rd world. We have had it coming.

Every time in history that a government has printed money (wealth that doesn't exist), it has meant the destruction of that currency. Without fail. This time the world's currencies are at stake. When these fail, what next? ( hit the max button on the graph) you only have to look at this graph to see that there is a big problem, the idea that anyone is contemplating helicopter money shows haow desperate it's getting. I personally think america should raise rates, if the ecnomy can't survive it, then it's only make believe. You can't get real growth on a system based around subsidised debt. You need to pop the bubbles to find the real growth industries.