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Former ECB Chief Economist: Helicopter Money Means Bankruptcy

March 23, 2016 (EIRNS)—Otmar Issing, former chief economist of the European Central Bank, denounced the "helicopter money" idea of European Central Bank (ECB) head Mario Draghi and the Bank of England (BoE). Issing sounded the alarm in an interview yesterday with the Frankfurter Allgemeine Zeitung (FAZ).

"I see the entire idea of helicopter money as worrisome, even davastating," Issing said.

"For, it is nothing else than a bankruptcy declaration of monetary policy.... A central bank that is throwing out money for free, will hardly be able to regain control of the printing-press."

Issing implied an attack on Draghi when he added, "This debate has spread out into the public. I see it as total intellectual confusion." And he said, "The economic condition of the world is being meddled into chaos which can’t be described."

The FAZ adds a key point:

"Helicopter money is intended to be a targeted financial injection to companies and consumers directly from the central bank, bypassing the normal banking sector [emphasis added—ed.]. ECB President Mario Draghi, in answer to a question, called this ‘a very interesting concept.’"

But it is the Bank of England which is studying the "interesting concept" most intensely, as described in a London Telegraph article March 13 by Ambrose Evans-Pritchard. The BoE is studying such "targetted injections" as done by creating electronic money, Evans-Pritchard reports. The goal would be to allow the central bank "to turn the money tap on and off with calibrated precision." And, said the BoE Deputy Governor Ben Broadbent, the system could be designed so that people or companies could bypass the commercial banks and hold deposits directly with the BoE. "It’s likely you’d see money moving out of existing [bank] deposits." Central bank electronic money "could be used to cover government services, tax collection, and benefit payments," noted Evans-Pritchard from his sources.

Then he came to the point:

"Ultimately it could achieve some of the objectives of ‘narrowing banking’ proposed by Adam Smith, or the ‘Chicago Plan’ put forward by U.S. [University of Chicago—ed.] economists in the ’30s ... to transfer control of money creation from private banks to the state."

And here the FAZ and New York Times were telling us "helicopter money" was intended as economic stimulus! But it is really an austerity tool, taking "money creation" away from those evil old commercial banks with that evil old practice of lending more than they have in reserve. Untimately, down that path lies the old British colonial "currency board," which made sure that a colonial country’s currency in circulation never exceeded the "value" of the gold in its vaults.

These central bank helicopters will be engaged in killing by friendly fire.

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