I’ve advocated many times on this blog that monetary-fiscal hybrid policies such as money-financedhelicopter drops to individuals should be established as the primary tool of macroeconomic stabilisation. In this manner, inflation/NGDP targets can be achieved in a close-to-neutral manner that minimises rent extraction. My preference for fiscal-monetary helicopter drops over negative interest-rates is primarily driven by financial stability considerations. There is ample evidence that even low interest rates contributeto financial instability.
There’s a deep hypocrisy at the heart of the macro-stabilised era. Every policy of stabilisation is implemented in a manner that only a select few (typically corporate entities) can access with an implicit assumption that the impact will trickle-down to the rest of the economy. Central-banking since the Great Moderation has suffered from an unwarranted focus on asset prices driven by an implicit assumption that changes in asset prices are the best way to influence the macroeconomy. Instead doctrines such as the Greenspan Put have exacerbated inequality and cronyism and promoted asset price inflation over wage inflation. The single biggest misconception about the macro policy debate is the notion that monetary policy is neutral or more consistent with a free market and fiscal policy is somehow socialist and interventionist. A program of simple fiscal transfers to individuals can be more neutral than any monetary policy instrument and realigns macroeconomic stabilisation away from the classes and towards the masses.Read it at Macroeconomic ResilienceThe Case Against Monetary Stimulus Via Asset Purchases
No one says exactly how the central bank is going to accomplish fiscal injection, however. Most of the more obvious means are beyond central banks' authority since this impinges on the fiscal authority. The fiscal authority must first delegate some of that authority to the central bank, a political matter that seems profoundly undemocratic and politically improbable.