Patrick Artus, NATXIS. 21 July 2016 - 749
Friday 22 July 2016, by Carlos San Juan
The ECB is playing on words or on the letter and spirit of the ECB’s mandate
The ECB claims that it is complying thoroughly with its mandate, and that accordingly:
It will never use "helicopter money";
It is not monetising public debt;
It is not interfering with countries’ fiscal policies.
But the ECB is playing on words, because in fact:
Using monetary creation to buy government bonds issued to finance government transfer payments is exactly equivalent to helicopter money;
Using monetary creation to buy government bonds (admittedly in the secondary market and not in the primary market) when central banks pay their profits back to the governments is precisely the monetisation of public debt;
Pushing down long-term interest rates allows governments, due to lower interest charges on the public debt, to increase their other expenses, and put off in time the adjustment of public debt ratios: there is clearly interference with fiscal policies.