In some countries, citizens have become indebted through the state – a national debt of more than 100 per cent of GDP is beginning to be common. In other countries, such as Sweden, the national debt is low, but instead private indebtedness is high. A large part of this development can be explained by lower interest rates. Households’ interest expenditure as a share of their incomes is not so much higher now than before, despite the large rise in debts. The debts have mainly been used to finance housing purchases, and, as the supply of housing has been relatively sluggish (although construction has been high in recent years), housing prices have risen substantially. But if we can explain part of the increase with low interest rates, does this mean it is not a problem? No, I don't think so. A high level of indebtedness leads to large risks – if interest rates rise, then households will have a much higher interest burden. 6 [25]  Monetary policy is conducted to attain an inflation rate close to the target and stable resource utilisation. The problem is that monetary policy has an impact through several different channels, including households’ consumption decisions, the exchange rate and investment. Monetary policy that is well balanced on the basis of inflation and resource utilisation in the economy as a whole can be problematic for a group of households that is highly indebted. In this situation, it is important that the banks and Finansinspektionen ensure that credit granting is sustainable.
However, the question is whether it will be possible to generate just enough inflation and then stop, or whether it will be impossible to shut the floodgates once the flow of money has started to reach full force. There are also interesting technicalities that differ from country to country that could be decisive for whether helicopter money could work differently to normal loan-financed fiscal policy stimulation measures. Does the central bank pay interest on central bank reserves and can cash be redeemed against these on a one-to-one basis? If prices do not increase one-to-one with the increase in the banknote volume (electronic or paper), a proportion of the increase in the banknote volume will closely resemble a debt increase, as the Riksbank will pay interest on this in the future. 18  Abolishing cash – or manner a negative interest rate on it Another suggestion from the literature focuses on the reason the lower bound for the policy rate exists, namely the existence of a risk-free asset with a return of 0 – cash. If interest rates become negative enough, households (in the case of the banks’ deposit rates) or the banks (in the case of the central bank’s deposit rates) will instead withdraw cash. Consequently, it is not possible to cut the level of interest rates indefinitely.