Tuesday, February 23, 2016
Interest rates are paid by people who borrow money, this is kind of a crucial point in our financial system. If you just print money, then the banks books go from -100:+100 to -100:+1000 and there are not enough borrowers to pay the interest. This is, if, for example, you felt interest rates would be a good way to control inflation. Or at the very least, you can capture zero interest rates, as the UK government has done by repatriating the interest paid to the BoE while pushing rising interest rates into the general population, but basically the same thing stands. This is imo the problem with helicopter money and why ultimately the central banks are bluffing, because they cannot drop helicopter money without losing pretty much the only rein they have on runaway inflation.