Must-read: Michael Heise: “The Case Against Helicopter Money”

Must-Read: Michael Heise does not seem to understand that central banks’ comprehensive assets include the ability to tax banks by raising reserve requirements:

Michael Heise: The Case Against Helicopter Money: “Helicopter drops would arrive in the form of lump-sum payments to households or consumption vouchers for everybody, funded exclusively by central banks…

…This… would reduce the central bank’s equity capital…. Proponents defend this approach by claiming that central banks are subject to special accounting rules that could be adjusted as needed…. Proponents… today include… Ben Bernanke and Adair Turner….

Distributing largesse… would have dangerous systemic consequences…. Policymakers would be tempted to… [avoid] difficult structural reforms… [and] would raise expectations… that central banks and governments would always step in to smooth out credit bubbles and mitigate their consequences…. Add to that the impact of the depletion of valuation reserves and the risk of negative equity–developments that could undermine the credibility of central banks and thus of currencies–and it seems clear that helicopter drops should, at least for now, remain firmly in the realm of academic debate.