Helicopter Money

michaels

http://www.moneysavingexpert.com/news/cards/2016/07/mastercard-faces-landmark-legal-claim-seeking-100s-in-damages-for-40-million-uk-shoppers?_ga=1.252214282.225875960.1421924051

Gist is that Mastercard is being sued for 20bn - a share of which is payable to every shopper in the UK - for excessive interchange fees (fee paid by retailer for each card transaction, I think the competition authorities have already found against them). I wonder if there might be a similar or larger sum also forthcoming from visa?

Assuming they would have the money to pay it sounds like a another major cash boost to the economy following on from the now dwindling PPI pot.

Just a shame it is not available now when it is really needed.

DRFC1879

I'm maybe too simplistic in my reasoning but I struggle top think of a better way of stimulating the economy than helicopter money in some form.


Whether it's through a corporate case like this or some sort of government scheme it gets cash straight into the pockets of consumers to either:
1. Pay off debts, leading to ongoing increase in disposable income and therefore grow their spending month after month.
2. Spend (a proportion) straight away, great for business.
3. Invest, driving an element of demand and therefore stability/confidence in markets.


Ok, I take the counter-arguments around devaluation/inflation but it seems to a layman such as I to be a much better solution than QE.

DRFC1879

Second guessing the "How would you do it/ make it work" question, perhaps through giving everyone a couple of months' break from PAYE or similar and "printing" the money that would normally be recouped in taxes therefore benefitting everyone proportionately.

Out,_Vile_Jelly

Come on, as if any of Joe Public is going to receive cold hard cash from this.

DRFC1879

In this case I'd be surprised to see consumers getting paid out. My point around helicopter money as a means of economical stimulus stands though.

michaels

I guess the problem with official helicopter money is not so much the one off impact but more the signal it sends - ie that the govt no longer has any intention to keep the currency sound but every time there is a 'crisis' (once a year in the NHS for example) the response from the govt will be to devalue the monetary base.

If that were to happen I suspect most would choose to only keep their 'cash' in inflation proof real assets or else to hold it abroad. Not a good place to be with a large current account deficit to finance every month. Having to suddenly go to zero current account deficit (whilst at the same time the services surplus likely falling of a cliff because without sound money all that banking etc might no longer happen in the UK) would be extremely painful - where we are talking Greek-style no medicines no pensions painful.

cells

I think there is a good argument to actually do proper money drops and for the ONS to do its best to assess the impact to the economy of such money drops. It would at least be a worthwhile experiment to have the results which would be useful in future debate all over the world

Government should borrow £60B and send out £1k for every British citizen. At one extreme the government pays 0.8% in interest and the public pays down £60B in debt at closer to 3.5% interest saving the public £2.1 billion annually while costing the government just £0.5 billion annually. At the other extreme all £60 billion is spent that same year adding more than £60 billion to GDP and some £30 billion returned as taxes. Or likely somewhere in between.

DRFC1879

Yeah, I get that Michaels but surely the same could be said to an extent regarding QE.


Perhaps a more refined way of doing it would be through a slightly different take on QE in which taxes are cut/frozen to encourage shopper confidence with the QE monies making up the deficit in the central government coffers rather than being dished out to the banks.

cells

michaels wrote: »

I guess the problem with official helicopter money is not so much the one off impact but more the signal it sends - ie that the govt no longer has any intention to keep the currency sound but every time there is a 'crisis' (once a year in the NHS for example) the response from the govt will be to devalue the monetary base.

If that were to happy I suspect most would choose to only keep there 'cash' in inflation proof real assets or else to hold it abroad. Not a good place to be with a large current account deficit to finance every month. Having to suddenly go to zero current account deficit (whilst at the same time the services deficit likely falling of a cliff because without sound money all that banking etc might no longer happen in the UK) would be extremely painful - where we are talking Greek-style no medicines no pensions painful.

you wont know for sure unless you run the experiment. its worthwhile doing at least once to get the results. If negative its not done again if positive its another tool which can be used potentiality many times in the future.

Personally I think it might be a good tool to use in recessions. Certainly now with money so much cheaper than it was a decade ago it seems more reasonable a thing to do at 0.8% government coupons than at 6-7% of yesteryear

DRFC1879

The cynical working class Northern genes in me come racing to the fore in my conclusion that something so beneficial to everyone (disproportionately so as a percentage of income to those at the bottom) is never, ever going to be entertained by anything other than a Corbynite government and I'm not opening THAT can of worms!

michaels

cells wrote: »

you wont know for sure unless you run the experiment. its worthwhile doing at least once to get the results. If negative its not done again if positive its another tool which can be used potentiality many times in the future.

Personally I think it might be a good tool to use in recessions. Certainly now with money so much cheaper than it was a decade ago it seems more reasonable a thing to do at 0.8% government coupons than at 6-7% of yesteryear

It is a bit chicken and egg though - the reason the govt can borrow at less than 1% is precisely because lenders are fairly confident that inflation is not going to destroy the value of the money loaned wheres in the past when govt borrowing cost so much more it was because people had no faith that inflation would be anything other than high.