The continued persistence of low inflation in Europe may require radical tools according to one of the most influential think tank in the world, named by Mario Monti himself.
Brussel based Bruegel stated in a memo to the new chair of the European Central Bank (ECB), Christine Lagarde, that ECB should consider just giving people money. They say:
“The ECB should also start to evaluate potential new tools in case it proves insufficient to regain and maintain price stability. Direct injections of cash into the economy by the central bank (ie helicopter money) or interventions in other markets (eg the market for inflation derivatives; see Papadia, 2015) should not be discarded without careful evaluation.
Given the limited space the ECB has, new tools should be studied so that, if ever needed, they can be applied with adequate knowledge of what they might achieve and at what risk.”
Bruegel further said ECB should relax its self-imposed constrains in regards to assets purchases or should “include other asset classes in its purchases, such as bank loans and possibly equities.”
Bitcoin as Monetary Policy?
Outright throwing money from a helicopter would be a very chaotic way of cash injections into the pockets of ordinary people.
An indirect way of possibly achieving the same aim would be the assets purchases program of equities. Stocks like Apple or Amazon.
The stock market however is very difficult to access especially for those who need money the most, young people in their late twenties or early thirties.
It is instead mostly old people that invest in stocks through pensions or otherwise. They however have already bought their house, have already raised their children, have already paid off their universities, and have already bought their cars.
Thus they need not spend, and so they hoard it. Slowing down the movement of money, and thus facilitating persistent low inflation.
Hip and cool, as well as very appealing to the aspiring young, bitcoin and cryptos in general are far more accessible, not lest because in many instances they were just given away or mined in university computers, but also because it is far too easy to buy them including peer to peer.
As such, an indirect way of cash injection towards those that need it the most and thus are most likely to spend, may well be the asset purchase of cryptos like bitcoin.
The aspiring and usually very entrepreneurial as well as go getting audience that something like bitcoin attracts, may further compound this cash injection because it would probably be used – at least in part – to build businesses from coffee shops to perhaps the next Amazon.
While equity purchases, in contrast, enrich those who are already rich. People like Jeff Bezos or Bill Gates who have most of the shares of companies they created decades ago.
As they have a lot more money than they know how to spend, more printed money would just sit there and do nothing because they don’t know what to do with it.
While something organic, like bitcoin, has considerable volatility because people that need the money and know what to do with it, cash out.
So as unorthodox as it sounds, the modern version of helicopter money may well be the outright purchasing of bitcoin which acts as an index of sorts for an entire ecosystem of thousands of businesses and millions of go getters that aspire to build a dynamic new economy.