“Helicopter money” saving the European economy

(Photo: I.Vukša)

The deflation in most European countries may be extremely dangerous in the long term. There are fewer employees being hired, with salaries also being reduced, which is further driving the economy into ruin, all of which is caused by the fall in prices of goods and services.

The problem of deflation can be solved in several ways, one of which is the concept proposed by economist Milton Friedman in 1969, known as “dropping money out of a helicopter”. The concept says that central banks are always able to maintain a healthy growth rate of the monetary base, as they always have at their disposal the option of printing banknotes and “dropping money out of a helicopter down on the starved economy”.

The simplest and surely the most elegant way is to distribute fixed amounts of money to all citizens, for example, 500 euros per citizen in all EU member states.

Lord Adair Turner, former Chairman of the British Financial Services Authority suggested this idea as one of the possible solutions at the London conference on transforming finances.

- Deflation has led us into a trap so deep that we should consider helicopter money. It shouldn’t be considered a wild idea, but it won’t cure all diseases either. We need it as part of our toolbox. Once it’s in, it should be used with caution, but not considered unacceptable – said Turner.

Many agreed that this perspective was “an interesting concept”.