Helicopter Money and Financial Repression in a Balance-Sheet Recession – A Paradox of Financial Deepening
Dr.Ying Wu, Professor,Perdue School of Business,Salisbury University, USA
Dr. Ying Wu is a tenured Professor of Economics in Franklin P. Perdue School of Business at Salisbury University, Maryland, USA. His fields of specialty are international economics, open-economy macroeconomic theory and monetary policy.
Banks’ high leverage can amplify their small financial losses into an insolvency risk and even a systemic banking crisis. While banks’ deleveraging measures such as fire sales of its assets and credit rationing restrain their creation of inside money and cause debt-deflationary (disinflationary) pressure to build up, the monetary authority’s counteracting QE measure supplements inside money with outside money. Nevertheless, the collapse of monetary multiplier and impotency of income velocity complicate the effectiveness of QE and exacerbates debt-deflationary process; and furthermore, fiscal debt overshadows the effectiveness of QE because the power of outside money ultimately depends on sound fiscal discipline.