[01] Gerasimos T. Soldatos, Department of Business Administration, American University of Athens, Athens, Greece.

Today, the world economy is at the brink of a major recession at zero lower bound. The recession has been fomented by the underconsumption induced by (i) the increasing income inequality, which is inherent in the neoliberal policymaking followed the last third of a century, and (ii) the declining wages being brought about by the increasing globalization and hence, international competition. And, the zero lower bound has been the aftermath of continuous interest rate reductions to confront the latent recessionary trends by stimulating investment but by increasing at the same time the prices of assets, bonds, and housing inciting several kinds of “bubbles” and inhibiting investment. The policy of “quantitative easing” in the place of interest rate reductions, a surrogate only of the latter has proved to be so far, for the simple reason that the money injections involved to spur business and household demand, are channeled towards the banking system, which withholds and does not pass on the money to the public. A money gift policy in the sense of transferring money directly to the public as a permanent asset for the private sector but not liability for the public sector, activating subsequently the Pigou effect, is advocated herein to be a viable policy alternative out of the current deadlock, ceteris paribus.

Global Recession, Underconsumption, Zero Lower Bound, Quantitative Easing, Money Gift/Rain

[01] Bernanke, Ben S., (2002), “Deflation: Making Sure 'It' Doesn't Happen Here”, Remarks Before the National Economists Club, Washington, D.C. http://www.federalreserve.gov/boarddocs/speeches/2002/20021121/default.htm#f8. [02] Blyth, Mark and Eric Lonergan, (2014), “Print Less but Transfer More: Why Central Banks Should Give Money Directly to the People”, Foreign Affairs, September/October Issue, pp. 98-109. [03] Buiter, Willem H., (2005), “New Developments in Monetary Economics: Two Ghosts, Two Eccentricities, A Fallacy, A Mirage and A Mythos”, Economic Journal, 115, No. 502, Conference Papers, pp. C1-C31. [04] Buiter, Willem H., (2014), “The Simple Analytics of Helicopter Money: Why It Works – Always”, Economics Discussion Papers, No 2014-24, Kiel Institute for the World Economy. http://www.economicsejournal.org/economics/discussionpapers/2014-24. [05] Cripps, Francis, Alex Izurieta and Ajit Singh, (2011), “Global Imbalances, Under-consumption and Overborrowing: The State of the World Economy & Future Policies”, University of Cambridge CBR Working Paper No 419. http://mpra.ub.uni-muenchen.de/39049/. [06] DeLong, Bradford J. and Lawrence H. Summers (2012), “Fiscal Policy in a Depressed Economy [with Comments and Discussion]”, Brookings Papers on Economic Activity, (Spring), 233-297. [07] Dobbs, Richard, Susan Lund, Tim Koller, and Ari Shwayder, (2013), “QE and Ultra-low Interest Rates: Distributional Effects and Risks”, McKinsey Global Institute Report. http://www.mckinsey.com/insights/economic_studies/qe_and_ultra_low_interest_rates_distributional_effects_and_risks. [08] Friedman, Milton, (1969), Optimum Quantity of Money, Aldine Publishing Company, Chicago. [09] Gills, Barry K., ed., (2011), Globalization in Crisis, Routledge, Oxford. [10] Gonchar, Nicholas S., Wolodymyr H. Kozyrski, and Anatol S. Zhokhin, (2015), “General Equilibrium and Recession Phenomenon”, American Journal of Economics, Finance and Management, 1(5), 559-573. [11] Irwin, Neil (2014), “Quantitative Easing Is Ending. Here’s What It Did, in Charts”, The New York Times, Oct. 29, 2014. http://www.nytimes.com/2014/10/30/upshot/quantitative-easing-is-about-to-end-heres-what-it-did-in-sevencharts.html?ref=economy&abt=0002&abg=1 &_r=0. [12] Piketty, Thomas, and Gabriel Zucman, (2014), “Capital is Back: Wealth-Income Ratios in Rich Countries 1700-2010”, Quarterly Journal of Economics, 129(4), 1255-1310. [13] Reichlin, Lucrezia, Adair Turner and Michael Woodford (2013), “Helicopter money as a policy option”, CEPR's Policy Portal “Vox”. http://www.voxeu.org/article/helicopter-money-policy-option.