Bill Gross took a peek into the future in his most recent Monthly Investment Outlook for Janus Capital, and he saw money raining from the sky.

Gross said he believes the structural changes currently occurring in the US economy will ultimately lead to so-called helicopter money.

gross

Of course, choppers wouldn’t literally drop cash from the sky. But helicopter money is the ultimate stimulus program. The newly printed cash goes directly into the hands of the people themselves. Basically, the government hands out money – or figuratively drops it from a helicopter. A recent Guardian article explained the policy this way:

As the Deutsche research makes clear, the most basic variant of helicopter money involves a central bank creating money so that it can be handed to the finance ministry to spend on tax cuts or higher public spending. There are two differences with QE. The cash goes directly to firms and individuals rather than being channeled through banks, and there is no intention of the central bank ever getting it back.”

Basically helicopter money is stimulus that isn’t paid for with private borrowing or taxes. It’s “free money.” Kind of.

So, why would policymakers ever do such a thing? Well, when you’ve driven interest rates below zero and exhausted round after round of traditional QE, what options are left?

Gross takes his analysis to an even deeper and somewhat philosophical level. He sees structural changes coming in the economy driven by advances in technology and a shift in generational thinking:

Most humans who walked this Earth were alive inside a culture that was constant for centuries, yet now it seemed that technology was mutating standards like a cytoplast or perhaps at worst – a cancer cell. Who could say whether this new life form was positive or negative? Who could say that an older generation was any less an ideal than the succeeding one? My experience of the divide between Boomers and Xers is like that; I recognize that youth will be served, but not always for the better…Change propels economies as well as cultures, and sometimes before we are even aware of it. We listen to Trump and Bernie, then Cruz and Hillary as if one of them might be the mythical Wizard of Oz, guiding us down that yellow brick road to reinvigorate growth. They all try to emulate the Wizard of course. ‘Change you can believe in’ was Obama’s mantra and then there was Clinton’s ‘I come from a city called Hope’ and so on. Eisenhower was probably the last honest politician. ‘I like Ike’ was his promise for the future, and I think many voters actually did – like Ike. But back then and certainly now, it was the economy that was changing, not politicians’ promises for a better future, and government policies usually took years to respond.”

Print Friendly, PDF & Email