There are several policies that could be and probably would be considered over the next 12-18 months. If private sector lacks confidence and visibility to raise velocity of money, then (arguably) public sector could. In other words, instead of acting via bond markets and banking sector, why shouldn’t public sector bypass markets altogether and inject stimulus directly into the ‘blood stream’? Whilst it might or might not be called QE, it would have a much stronger impact and unlike the last seven years, the recovery could actually mimic a conventional business cycle and investors would soon start discussing multiplier effects and positioning in areas of greatest investment.
Willem Buiter, chief global economist at Citigroup, is also recommending “helicopter money drops” to avoid an imminent global recession, stating:
A global recession starting in 2016 led by China is now our Global Economics team’s main scenario. Uncertainty remains, but the likelihood of a timely and effective policy response seems to be diminishing. . . .
Helicopter money drops in China, the euro area, the UK, and the U.S. and debt restructuring . . . can mitigate and, if implemented immediately, prevent a recession during the next two years without raising the risk of a deeper and longer recession later.