Presbyterian and legendary bond investor Bill Gross who is managing the $1.3 billion (assets) Janus Unconstrained Bond Fund is suggesting on how to help boost the U.S economy through a "helicopter money" concept.
The metaphor could be doubted, but in his published Investment Outlook, Gross was firm that to stimulate US economy an airdrop of money should be the next big monetary and fiscal policy move and it can be done by printing trillions of dollars to buy government bonds.
He said the Federal Reserve and the US Treasury would be the major player in these another round of quantitative easing, which proved effective when adopted by the European Central Bank, Bank of Japan, and the Bank of England.
"They bought bonds by printing money, thereby expanding their balance sheets, and then remit any net interest from their trillions of dollars or yen bond purchases right back to their treasuries," he said.
He said, in essence, the money will remain untouched as long as the process continue uninterrupted.
"Helicopter money" is a metaphor in reference to the 1969 idea by economist Milton Friedmanan who said the sure way to pull the economy up is for citizens to scramble to pick up money drop from helicopters.
Gross said his confident that central banks will print more helicopter money via QE "perhaps even in the U.S. in a year or so, and if that happens governments can focus on infrastructure, health care, and introduce a "universal basic income" for displaced workers amongst other increasing needs.
Gross said the renewed QE from the Federal Reserve will lead to a less independent central bank, and a more permanent mingling of fiscal and monetary policy.
"Interest rates stays low for a certain period as asset prices will roll artificially high, and at some point monetary policy will create inflation and markets will be at risk, while investors should be content with low single-digit returns," he added.
