Why I’m against helicopter drops


More on helicopter money, prompted by Simon Wren Lewis’ post, and exchanges with Eric Lonnergan and others in the comments appended to my last post on this.

First, responding to Simon.  He says that I argue “that if the central bank assumes money is irredeemable, and starts printing a lot of it, people may stop wanting to use it. If they do that, it will no longer be seen as wealth.” Simon remarks: “This is real angels and pins stuff that can come from taking microfoundations too seriously.”

Most people won’t click through to my post, and if you read that paragraph, you would not get why I wrote the post, or what I think about helicopter drops and why.  The message is:  ‘Tony, taking a too-literal reading of the wrong microfounded model, decides helicopter drops won’t work, so don’t take him seriously.’

I’m against helicopter drops.  That bit…

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Labour Costs: Who is the Outlier?

Sparse Thoughts of a Gloomy European Economist

Spain is today the new model, together with Germany of course, for policy makers in Italy and France. A strange model indeed, but this is not my point here. The conventional wisdom, as usual, almost impossible to eradicate, states that Spain is growing because it implemented serious structural reforms that reduced labour costs and increased competitiveness. A few laggards (in particular Italy and France) stubbornly refuse to do the same, thus hampering recovery across the eurozone. The argument is usually supported by a figure like this


And in fact, it is evident from the figure that all peripheral countries diverged from the benchmark, Germany, and that since 2008-09 all of them but France and Italy have cut their labour costs significantly. Was it costly? Yes. Could convergence have made easier by higher inflation and wage growth in Germany, avoiding deflationary policies in the periphery? Once again, yes. It remains…

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