Top Citi Economist Wants To Eliminate Money

A blog about business and economics.
May 9 2012 3:06 PM

Citi's Willem Buiter Joins Team Abolish Physical Currency

As I've been saying for a while, humanity could rid itself of the pesky zero bound problem by eliminating physical currency and creating a situation where nominal interest rates can go negative. Demographic shifts and population aging may someday (like "next few decades" not "later this summer") soon force us to choose between this option and the world economy falling into a basically permanent recession. Now it looks like Citi's chief economist Willem Buiter is on board. And in the shorter term, he wants much more aggressive central bank action, saying the Fed the ECB the Bank of England and the Bank of Japan should be:

– Reducing rates, first by lowering them all the way to zero (UK and euro area),then by eliminating the effective lower bound on nominal interest rates (all four currency areas)

– Carrying out more imaginative forms of quantitative easing (QE) and credit easing (CE), in all four currency areas, by focusing on outright purchases of and/or loans secured against less liquid and higher credit risk securities, subject to a sovereign guarantee (joint and several in the euro area) for all such risky central bank exposures

– Engaging in helicopter money drops (all four currency areas): a combined fiscal- monetary stimulus

Of these "helicopter drops" or "combined fiscal-monetary stimulus" is my favorite. The idea is to print money and give it to people. The exact statutory situation differs from place to place, but you could achieve this in a few different ways. One would be for the legislature to enact a law saying "everyone gets $500" and then have the central bank buy $500 per person worth of bonds and light the bonds on fire. Another would be for the central bank to say it's now engaging in asset purchases whereby anyone who wants to sell a sock can get $500 from the bank for it. Or you could offer loans secured by socks. The point is that debtors would pay off debts, spenders would buy stuff, savers would save, but everyone's expectations of nominal spending and income levels would rise.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.



Meet the New Bosses

How the Republicans would run the Senate.

The Government Is Giving Millions of Dollars in Electric-Car Subsidies to the Wrong Drivers

Scotland Is Just the Beginning. Expect More Political Earthquakes in Europe.

Cheez-Its. Ritz. Triscuits.

Why all cracker names sound alike.

Friends Was the Last Purely Pleasurable Sitcom

The Eye

This Whimsical Driverless Car Imagines Transportation in 2059

Medical Examiner

Did America Get Fat by Drinking Diet Soda?  

A high-profile study points the finger at artificial sweeteners.

The Afghan Town With a Legitimately Good Tourism Pitch

A Futurama Writer on How the Vietnam War Shaped the Series

  News & Politics
Sept. 21 2014 11:34 PM People’s Climate March in Photos Hundreds of thousands of marchers took to the streets of NYC in the largest climate rally in history.
Business Insider
Sept. 20 2014 6:30 AM The Man Making Bill Gates Richer
Sept. 20 2014 7:27 AM How Do Plants Grow Aboard the International Space Station?
  Double X
The XX Factor
Sept. 19 2014 4:58 PM Steubenville Gets the Lifetime Treatment (And a Cheerleader Erupts Into Flames)
  Slate Plus
Tv Club
Sept. 21 2014 1:15 PM The Slate Doctor Who Podcast: Episode 5  A spoiler-filled discussion of "Time Heist."
Sept. 21 2014 9:00 PM Attractive People Being Funny While Doing Amusing and Sometimes Romantic Things Don’t dismiss it. Friends was a truly great show.
Future Tense
Sept. 21 2014 11:38 PM “Welcome to the War of Tomorrow” How Futurama’s writers depicted asymmetrical warfare.
  Health & Science
Bad Astronomy
Sept. 22 2014 5:30 AM MAVEN Arrives at Mars
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.