GENEVA â€" Imagine a banker getting on a helicopter loaded with bank notes and flying over the whole country, raining money down on the population. This idea came from none other than Milton Friedman. In the late 1960s, as the economy was struggling, the iconic American economist believed that people would jump on the falling cash and, seeing it as a unique opportunity, would instantly start spending it. Thus an immediate shot of stimulating economic growth, and a new boost to inflation.
This isn't as utopian as it sounds, and is actually rather topical, given that a growing number of economists are currently whispering this idea in the ears of central banks. Asked about the possibility to use "money helicopters" to bring the eurozone out of the doldrums, Mario Draghi said he found the idea "very interesting."
"We hadn't really thought about or discussed helicopter money," the European Central Bank chief added. "It's a very interesting concept that's now being discussed by economists, academics in different circumstances."
The idea is complex and not yet well-defined, according to the Italian ECB president, but it's convincing more and more people from all sorts of backgrounds. In most people's minds, things are relatively simple: What if central bankers, instead of supporting the banks by buying up debt and flooding them with cash, distributed money directly to the citizens?
Wolfgang Münchau, a Financial Times" star columnist, recently wrote about the need for a debate on monetary policy alternatives, explaining that such a debate must start with the acknowledgement that quantitative easing (QE) has failed.
In Europe, Japan and the United States, central banks have injected hundreds of billions of euros, yens and dollars to kickstart the economy, avoid deflation and prevent the financial system from going dry. But it has not succeeded in durably reviving the economy. That's why Münchau believes that central banks have to find new ideas, including that of direct distribution of money to the people.
That's exactly the concept defended by the organization QE For People, which regroups together multiple European associations and economists. "More and more people are becoming aware that we've reached an impasse and that we have to think of new solutions," says Stan Jourdan, explaining that the campaign he leads will "study these solutions and promote them."
QE for people however is still without a specific plan to put forward. "We're made of different organizations that have different proposals. Some advocate a sort of "green QE" that would help us with energy transition," Jourdan explains. "Others talks instead of distributing money to the citizens to boost consumption or to finance investments."
Michael Malquarti, assistant director at Geneva-based Syz Asset Management and the most vocal supporter of the idea of distributing money to the population in Switzerland, says central banks' policies have had little effect on growth and inflation, especially considering the exceptional amounts of money they've distributed.
"They're also very risky," Malquarti adds. "Take Switzerland: With such low rates both for short-term and long-term loans, the Swiss National Bank is encouraging people to borrow to buy property. But this is starting to cause problems on the estate market."
And what's happening in Switzerland is also happening elsewhere in Europe. "Because of the central banks' policies, there's a risk that resources are wrongly allocated, which could potentially create a new crisis," the expert warns.
Malquarti's plan would involve the Swiss National Bank distributing to the country's citizens what he calls a "monetary allowance." He says it would add up to no more than 1.5% of Switzerland's GDP, the equivalent of 1,000 francs ($1,000) per person and per year. This is still "a lot less than the amount the Swiss National Bank spent buying currencies over the last few years to stabilize the franc," he says.
Switzerland's central bank has said that such proposals are outside of its legal mandate, and have not taken a position.
Sergio Rossi, another Swiss economist and professor who also supports some form of QE for the public, offers a more cautious viewpoint. "Distributing a monetary allowance wouldn't weaken the Swiss franc's exchange rate (the problem it's supposed to tackle), but doing that in EU countries could kickstart the eurozone's economy."
If most people agree on the central banks' powerlessness, the question remains: Will they dare let the idea of helicopter money spread? For now, at least, it's starting to gain altitude.
It is today a proven fraud, nailed by the French stock market watchdog: Air Next resorted to a full range of dubious practices to raise money for a blockchain-powered e-commerce app. But the simplest of errors exposed the scam and limited the damage to investors. A cautionary tale for the crypto economy.
PARIS — Air Next promised to use blockchain technology to revolutionize passenger transport. Should we have read something into its name? In fact, the company was talking a lot of hot air from the start. Air Next turned out to be a scam, with a fake website, false identities, fake criminal records, counterfeited bank certificates, aggressive marketing … real crooks. Thirty-five employees recruited over the summer ranked among its victims, not to mention the few investors who put money in the business.
Maud (not her real name) had always dreamed of working in a start-up. In July, she spotted an ad on Linkedin and was interviewed by videoconference — hardly unusual in the era of COVID and teleworking. She was hired very quickly and signed a permanent work contract. She resigned from her old job, happy to get started on a new adventure.
Others like Maud fell for the bait. At least ten senior managers, coming from major airlines, airports, large French and American corporations, a former police officer … all firmly believed in this project. Some quit their jobs to join; some French expats even made their way back to France.
Share capital of one billion
The story began last February, when Air Next registered with the Paris Commercial Court. The new company stated it was developing an application that would allow the purchase of airline tickets by using cryptocurrency, at unbeatable prices and with an automatic guarantee in case of cancellation or delay, via a "smart contract" system (a computer protocol that facilitates, verifies and oversees the handling of a contract).
The firm declared a share capital of one billion euros, with offices under construction at 50, Avenue des Champs Elysées, and a president, Philippe Vincent ... which was probably a usurped identity.
Last summer, Air Next started recruiting. The company also wanted to raise money to have the assets on hand to allow passenger compensation. It organized a fundraiser using an ICO, or "Initial Coin Offering", via the issuance of digital tokens, transacted in cryptocurrencies through the blockchain.
While nothing obliged him to do so, the company owner went as far as setting up a file with the AMF, France's stock market regulator which oversees this type of transaction. Seeking the market regulator stamp is optional, but when issued, it gives guarantees to those buying tokens.
The infamous typo that brought the Air Next scam down
Raising Initial Coin Offering
Then, on Sept. 30, the AMF issued an alert, by way of a press release, on the risks of fraud associated with the ICO, as it suspected some documents to be forgeries. A few hours before that, Air Next had just brought forward by several days the date of its tokens pre-sale.
For employees of the new company, it was a brutal wake-up call. They quickly understood that they had been duped, that they'd bet on the proverbial house of cards. On the investor side, the CEO didn't get beyond an initial fundraising of 150,000 euros. He was hoping to raise millions, but despite his failure, he didn't lose confidence. Challenged by one of his employees on Telegram, he admitted that "many documents provided were false", that "an error cost the life of this project."
What was the "error" he was referring to? A typo in the name of the would-be bank backing the startup. A very small one, at the bottom of the page of the false bank certificate, where the name "Edmond de Rothschild" is misspelled "Edemond".
Before the AMF's public alert, websites specializing in crypto-assets had already noted certain inconsistencies. The company had declared a share capital of 1 billion euros, which is an enormous amount. Air Next's CEO also boasted about having discovered bitcoin at a time when only a few geeks knew about cryptocurrency.
Employees and investors filed a complaint. Failing to find the general manager, Julien Leclerc — which might also be a fake name — they started looking for other culprits. They believe that if the Paris Commercial Court hadn't registered the company, no one would have been defrauded.
Beyond the handful of victims, this case is a plea for the implementation of more secure procedures, in an increasingly digital world, particularly following the pandemic. The much touted ICO market is itself a victim, and may find it hard to recover.
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