Can the ECB create money for a universal basic income?

Funding basic income through taxation is costly. At the same time, low consumer demand is a major worry. The European Central Bank could kill two birds with one stone by giving money directly to citizens.

Finnish social welfare agency KELA’s basic income experiment has got plenty of attention in Finland and elsewhere. This is not surprising: in recent years various proposals for a basic income have been submitted by a growing number of scientists, politicians and non-governmental organizations in several countries. Continue reading “Can the ECB create money for a universal basic income?”

Eurodividend: A partial basic income paid to all Europeans

Europe is in deep trouble – economically, socially, and politically. We need new, bolder and stronger instruments to counter the forces of disintegration. A partial basic income paid to all Europeans – a Eurodividend – could become the policy instrument that safeguards the EU and especially the Eurozone from asymetric economic shocks and reconciles citizens with the idea of European integration.

Today, the risk of poverty and social exclusion levels in the EU and in particular the precarity of young people, child poverty and in-work poverty are extremely worrying whilst the prospects of the EU’s 2020 poverty target (i.e. to lift 20 million people out of poverty by 2020) look rather dim. Moreover, unemployment levels remain very high and particularly affect young people whereas the technological and digital revolution is affecting employment in various aspects, through the replacement of a great amount of jobs, the reorganisation of the workplace and the increase of the gap between productivity gains and income earned by workers. Finally, in the Eurozone, the introduction of the euro has produced increasing economic divergence between deficit and surplus countries (in terms of GDP per capita, labour productivity or unemployment levels among others) as well as important social imbalances in terms of public investment in education, healthcare, or social security. Continue reading “Eurodividend: A partial basic income paid to all Europeans”

ECB should design, decide and implement the helicopter money programme

Instead of injecting the equivalent of €2.2 trillion into financial markets, the ECB could have injected a quarter as much money and distributed €1,000 to all adult citizens in the eurozone.

The European Conservatives and Reformists (ECR) group in the European Parliament recently launched “Leer Geld”, an initiative led by MEP Sander Loones, to raise awareness about the effects of the monetary policy conducted by the European Central Bank (ECB).
The initiative is to be welcomed: monetary policy is too often overlooked by civil society, yet its impact on our lives has never been greater. Under its “quantitative easing” programme (QE), the ECB has been buying large quantities of government bonds since 2015. Surely injecting the equivalent of 20 percent of GDP into the eurozone finance sector cannot be without consequences. Continue reading “ECB should design, decide and implement the helicopter money programme”

ECB confirms ‘Helicopter Money’ is Legally Feasible under Conditions

Mario Draghi first discussed the notion of ‘helicopter money’ in March 2016, saying “it is an interesting concept.” Since then however, the head of the European Central Bank repeatedly stated that the idea that central banks could distribute money directly to citizens, was fraught with accounting-wise, technical and legal complexity.” However the ECB had declined at several occasion to specify in detail which were the foreseen legal obstacles.

In a letter dated 29 November to Spanish MEP Jonas Fernandez, the ECB finally provides clarifications. And our interpretation of the letter lead to the conclusion that those legal issues are very weak and solvable.

The QE for People campaign praises the ECB for finally providing this legal clarification. “By providing a detailed answer on this point, the ECB acknowledges its understanding of our proposal, which many economists say could bring significant benefits to the economy” said Stan Jourdan, QE for People campaign coordinator.

Helicopter money must be designed as monetary policy

Continue reading “ECB confirms ‘Helicopter Money’ is Legally Feasible under Conditions”

MEPs call on Mario Draghi to consider helicopter money

Eighteen members of the European Parliament have signed an open letter to the Head of the European Central Bank, emphasizing the need to consider “helicopter money” — a proposal to distribute money directly to people as a citizens’ dividend.

Some advocates argue that a basic income should be financed by “helicopter money” — the printing of new money by central banks for direct distribution to individuals. To be sure, the policy is contested, even among basic income supporters. Many suggest redistributive policies to fund a basic income, as opposed to the creation of new money, and some have vocally opposed helicopter money. Continue reading “MEPs call on Mario Draghi to consider helicopter money”

Helicopter money or European Unconditional Citizens Income?

Somewhere in March 2015, the European Central Bank (ECB) launched its long-awaited programme of quantitative easing (or QE), adding lots of public debt to the private kind it has already been buying. Its monthly purchases will rise from around €13 billion ($14 billion) to €60 billion until at least September 2016. The ECB is just the latest central bank to jump on board the QE bandwagon. Most rich-economy central bankers began printing money to buy assets during the Great Recession, and a few, like the Bank of Japan, are still at it. But what exactly is quantitative easing, and how is it supposed to work? Continue reading “Helicopter money or European Unconditional Citizens Income?”

Can helicopter money kick start the Eurozone?

With Eurozone growth still sluggish, should the European Central Bank (ECB) consider a radical option – like helicopter money?

ING senior economist Teunis Brosens explains, in this eZonomics video, that the ECB has already employed quantitative easing[1] and lowered interest rates below zero. But how effective these measures will be is unclear, he says.

Continue reading “Can helicopter money kick start the Eurozone?”

What is helicopter money?

Helicopter money is a reference to an idea made popular by the American economist Milton Friedman in 1969.

In the now famous paper “The Optimum Quantity of Money”, Friedman included the following parable:

Let us suppose now that one day a helicopter flies over this community and drops an additional $1,000 in bills from the sky, which is, of course, hastily collected by members of the community. Let us suppose further that everyone is convinced that this is a unique event which will never be repeated.”

The basic principle is that if a central bank wants to raise inflation and output in an economy that is running substantially below potential, one of the most effective tools would be simply to give everyone direct money transfers. In theory, people would see this as a permanent one-off expansion of the amount of money in circulation and would then start to spend more freely, increasing broader economic activity and pushing inflation back up to the central bank’s target. Continue reading “What is helicopter money?”