Category: Borrow Money
Hits: 385

Once the money is out there, there is no simple way of clawing it back. "There is an unknown element in how this would affect households' perceptions of money, and how it works," says Nangle.

Central bank money-printing "might appear to be a free lunch", says Karen Ward, an HSBC economist.

Without the constraints of having to raise taxes or borrow money to fund spending, the authorities might become profligate, it is feared. If households and investors do not believe that the use of helicopter money is a one-off, then they may lose faith in officials to keep the supply of money stable, and inflation low.

This chain of events can create a self-fulfilling rise in inflation, leading to a dreaded state of hyperinflation, where prices rise so quickly that it is hard for shops to keep up, and money and savings lose their value rapidly.

Ward says that "if markets suspect governments, rather than central banks, are in the driving seat on helicopter money they will suspect higher inflation".