Free Trial

MNI INTERVIEW: US Avoiding Dangerous Helicopter Money - Boivin

By Greg Quinn
     OTTAWA (MNI) - Policymakers in the U.S. and elsewhere are coordinating
moves to push cash into the economy without reaching the "slippery slope" of
imperiling central bank independence, BlackRock Investment Institute chief Jean
Boivin told MNI.
     Congress is working on a USD1 trillion package and the Fed is adding even
more liquidity to stabilize markets, as economists predict double-digit
quarterly GDP declines. Treasury Secretary Steven Mnuchin has called for checks
to be sent to households.
     "We know what the Fed is doing, we know what the Treasury is doing, and
right now the checks that are being sent to individuals, this is fiscal policy,
this is the Treasury that is ending those checks. So we aren't in the helicopter
money world," Boivin said in an interview.
     "But it does have one feature of what we thought the future policy should
be, which is to go more directly and put money in the hands of people and
entities that can use it and deploy it," he said.
     Boivin last year argued for the establishment of standing emergency fiscal
facilities, partly to dull the temptation of uncontrolled fiscal spending and
damage to institutional credibility. He wrote the paper with former Fed Vice
Chairman Stanley Fischer, former Swiss National Bank chief Philipp Hildebrand
and BlackRock's Elga Bartsch.
     "Coordination doesn't undermine independence, in fact, it's the opposite,
you need to have independence to effectively coordinate," Boivin said. "They are
slippery slopes, if [they] aren't addressed under pressure they could sort of
blur the distinction between monetary and fiscal policy."
     Boivin, a former Bank of Canada deputy governor and treasury official, also
cited UK and Canadian policy moves as examples of mature fiscal and monetary
     The global economy can make a strong comeback from the COVID-19 pandemic if
governments follow through with major aid to bridge incomes lost through
shutdowns needed to contain the virus, Boivin said.
     "We are seeing now a lot more evidence of fiscal policy measures that are
in line with what would be needed," he said. "The role of policy is to make sure
it bridges households and companies, so this tough period doesn't turn and
create permanent damage."
     The situation is more like a natural disaster than a recession, with
negative data having little bearing on the potential recovery, he said. The good
news is there are few signs of persistent headwinds like deleveraging seen
through the global financial crisis.
     "It's about containing the virus, and in fact the more you contain it the
more negative the data should be, but it also should lead you to be more
confident about the medium-term health of the economy," Boivin said from London.
     The health situation is "unprecedented" for policy makers and the economy,
he said.
     "It's going to be very sharp and deep, we don't know how long it's going to
last until we have more visibility on the scale of the issue and whether we
contain it, but after that we should go back to the healthy fundamentals of the
economy," Boivin said. "If we are addressing these tensions properly, there is
nothing that is going to prevent the economy then from recovering quickly."
     Global supply chains are one area that companies will be hesitant to
rebuild in the same way. "We already had a dynamic in play that was questioning
the supply chain arrangement globally, and now we have on top of that an
appreciation that there are vulnerabilities and risks that require more
diversification," Boivin said.
--MNI Ottawa Bureau; +1 613-314-9647; email:
[TOPICS: MMUFE$,M$B$$$,M$C$$$,M$E$$$,M$U$$$,MC$$$$,MI$$$$,MT$$$$,MX$$$$,M$$BE$]

To read the full story



MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.