Adair Turner, head of the UK Financial Services Authority, suggested that central banks may have to plough even deeper into unconventional territory to overcome the “powerful headwinds” of deleveraging. He did not elaborate, but has been interpreted as favouring monetary policy’s nuclear option: “helicopter drops” of newly printed money.
Are helicopter drops a good idea? Printing money – not just temporarily for trading securities in the market, but permanently handing it over to be spent by someone – is the central banker’s ultimate heresy. Yet it would be irresponsible to rule the option out, no matter what the circumstances.
So optimal policy also needs to include a willingness to employ still more innovative and unconventional policies, and to consider the combined impact of multiple policy levers – monetary policy, Bank of England liquidity insurance, prudential regulation and direct support to real economy lending – which we used either to consider quite separately, or else avoid entirely.Turner's Full Mansion House Speech - gives a server error ---- hmmmm ?
Ft Alphaville highlights
An FT reflection by James Mackintosh
Article at Central Banking