The fact that industrial nations enter an economic downturn together has been a rule rather than an exception. The decline at the beginning of the 1990s was different, because it was due to different types of disturbance. The German reunification meant that Germany and Europe went their own way to some extent. Bank crises hit different countries at different points in time. In Sweden there was also a very large increase in real interest rates following in the footsteps of the change in the inflation rate and the defence of the fixed exchange rate, which contributed to the crisis in Sweden becoming deeper than those in most other industrial nations and, in addition, the worst recession Sweden had experienced since the 1930s. The downturn we have just experienced has been unusual in that the decline in production in the USA and Germany was lower than usual and in many European countries there has been no decline in growth at all. In Sweden, too, the slowdown appears to have been one of the mildest during the postwar period. Growth is not expected to decline for a single quarter. During all of the previous downturns in economic activity there has been at least one quarter with a negative result for growth and since 1970 economic downturns have always led to a decline in production over an average of four quarters. Households’ consumption has been relatively strong in many countries during the downturn and this is also the explanation why countries have avoided a decline in production altogether.
In addition, this operation would be financially neutral at the national level, since the recipients of helicopter money would simply be the country’s citizens – a bit like in the case of dividend payments with all households receiving the same amount. Critics might say that it is not the role of central banks to decide on the distribution of funds and that any helicopter money drop should be executed by the government with mere central bank backing. But in fact, any change in the interest rate, just like any other change in the monetary policy stance, inevitably redistributes funds, and indeed does so in a much less transparent way. A helicopter money drop is probably possible even without a digital currency – for example, using central registries of personal bank accounts, often operated by central banks on behalf of the government. But the benefit of using a digital currency is that the central bank would not theoretically need to work with the government, so its independence would not be put in danger. Moreover, the digital currency could be designed specifically to smooth the transmission of helicopter money to consumption. Again, I stress that I only consider this a realistic scenario in a deep recession. The central bank could also limit the possibility of transferring these funds to bank accounts (and vice versa, in order to eliminate any risk of digital bank runs).