The financial solution is obvious, but who will bring it about?

At times of desperation such as now, all sorts of ridiculous ideas will emerge from the woodwork. We already have one — negative interest rates. It is already being practised by half-a-dozen advanced countries that ought to know better and, so it is said, 20 other countries somewhere in the world. It won’t last for long. If banks don’t recall the money from the central banks in order to lend it to entrepreneurs, then their own depositors will withdraw their cash from the banks and keep in under the mattress.

Another one that’s just becoming fashionable is “Helicopter cash”. There’s dispute as to who first invented the phrase — meant only as a joke to start with — but it’s appearing in more than a few newspapers at present. It’s a variant of Maynard Keynes’s original suggestion — again only a humorous one — that the Great Depression (the 1929 one) could have been alleviated — consumer demand encouraged — by burying bottles of money down old coal mines. At least this trope had the merit of causing people actually to work to get hold of the money.

Helicopter cash — or meat pies from heaven, as the Chinese say — doesn’t have to be worked for. It’s a free gift from the government. If large quantities are dropped and continued for long enough — beyond a relatively brief ‘sunset period’ of years — then it’s effective. But you’re also into hyperinflation and an even more desperate situation when it all crashes.

The Chinese have just joined the International Monetary Fund (IMF) — a mark of high status they’ve been aiming for years — and will be hosting fellow members in Shanghai this week. The IMF will also be searching for a way that the world can dig oneself out of a massive negative balance of trade. This is something that could never have happened if (a) there’d been an international body using double-entry bookkeeping on all world trade — and preventing debt building up in the first place — or (b) a gold-standard trading currency which would have carried ou double-entering automatically.

International politics is not yet in a state that either solution will be possible for a long time yet — if ever at all, given man’s nationalistic instincts. It will probably need another 2008 catastrophe when a few of the largest multinational corporations solves the problem by bringing about a self-balancing trading currency of their own. They know that they’ll never solve the problem of territorial rivalry but at least they can keep the world economy going.

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