Yellen: Make It Rain

Switzerland just said no (with 78%) to a guaranteed income (helicopter money) for all its citizens.

With an unemployment rate of about 3 1/2%, they didn’t really need it. The fear was that it would encourage immigration. That seemed to be enough of an argument for Swiss adults to decide they did not want an extra 2500 CHF (625 CHF per child) per month. The system was to replace welfare.

The practice remains more or less untested. It was first posited by economist Milton Friedman in 1969. The basic principle is that if a central bank wants to raise inflation and output in an economy that is running substantially below potential, one of the most effective tools would be simply to give everyone direct money transfers.

Canada tried it in limited amounts and found that it did decrease poverty, but at what price? Some had trouble dealing with it and feared it would push the country further towards socialism. The Canadian program is set to launch in 2016. Canada’s unemployment rate is twice that of Switzerland which means it might have more popular support.

Finland is set to begin in 2017. France, United Kingdom, and parts of the Netherlands are set to implement similar programs soon. Will the US be next?

Helicopter money indeed, but for whom? Cui bono?



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