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What happens if the money supply is linked to central bank purchases of assets whose value will drop?

- "Central banks (Federal Reserve, Bank of England, ECB) are now buying risky assets in order to restore liquidity in the markets for these assets and prevent defaults among economic agents. However, the prices of these assets may decline: this would mean that part of the money supply is not linked to the central bank’s holding of assets of an equivalent value. This amounts to a "helicopter money" situation: the central bank distributes money to economic agents ex nihilo. Conversely, central banks may in certain cases make capital gains on the purchased assets."
- "We look at the effects of "helicopter money". If its quantity is substantial and if economic agents spend it on goods and services, it can lead to inflation (except if the elasticity of the supply of goods to demand is perfect). If economic agents spend it by purchasing assets, there will be an asset price bubble; if they keep it in the form of money, nothing happens, which is the case currently."
Natixis Flash Economics 327 20100625

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