Helicopters wanted

UBS House View «October 2019»

In making Apocalypse Now, director Francis Ford Coppola learned that if you want to get something done you need government helicopters, famously locating film production in the Philippines when the country’s then-president agreed to provide him with military equipment.

The need for government helicopters was also a theme in outgoing European Central Bank (ECB) President Mario Draghi’s recent press conference. When asked whether “helicopter money” would be helpful in stimulating the European economy, he said that “giving money to people, in whatever form, [is] a fiscal policy task, it’s not a monetary policy,” before adding that “it’s high time, I think, for the fiscal policy to take charge.”

While central bankers might judge it to be “high time” for fiscal policy to take charge, we don’t yet see helicopters full of money on the dawn horizon. Setting aside our own ideas about the cinematic merits of Apocalypse Now or the economic wisdom of helicopter money, in this letter I look at how we see developments in fiscal and monetary policy impacting markets.

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