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The monetary helicopters are set to scramble

COMMENT: If negative interest rates do not work, central banks could bomb the economy with cash

Helicopter drop: authorities could consider making direct payments to consumers
Helicopter drop: authorities could consider making direct payments to consumers Photo: iStock

Since the financial crisis of 2008, the major central banks of the world have rewritten the rulebooks of monetary policy. We have seen orthodox monetary policy used aggressively, with interest rates reduced to near zero.

Then from about 2011, we saw central banks make active use of their balance sheets, buying financial assets outright under what has become known as quantitative easing and in the process growing their balance sheets to sizes far beyond the pre-crisis norm. And since 2012, we have seen some central banks reduce their deposit rates below zero, thus breaking what was long believed to be the "zero lower bound" - in other words, the "iron fact" that interests rates could not go below 0%.

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