Monex BMO Securities has told clients that quantitative easing programs have reached the limits of their effectiveness and predicted that central bank policymakers and governments may soon resort to direct monetary funding or “helicopter money”.

The company made its controversial forecast in a scheduled investment bulletin sent to institituional clients earlier this week. It cited the diminishing returns of Japan’s massive quantitative easing program and the negative interest rate policy, which has failed to create enough inflation to reach the Bank of Japan’s 2% target.

The Monex BMO Securities bulletin said that the failure of unconventional policy would give way to what it called ultra-unconventional policy as governments tried to stimulate economies in face of slowing global growth.

“Direct monetary funding would more or less see central banks create money out of thin air to buy sovereign bonds directly from governments. This would have the advantage of bypassing the commercial banks and enable the government to literally deposit money in people’s bank accounts by way of tax rebates,” explained Oscar Tennyson, chief economist at Monex BMO Securities.

“A more likely use would be to fund fiscal spending like infrastructure improvements and the building of airports, bridges and railways all of which would create economic activity and drive growth.”

The policy is increasingly being freely discussed by mainstream politicians in the US and the UK but many economists are highly skeptical warning of the potential for a disastrous explosion in inflation that would be very difficult to remove from the financial system once it had gained a foothold.

About Monex BMO Securities
Monex BMO Securities is a privately held, fully independent investment and wealth management leader, with retail operations based in Toronto, Canada and corporate trading division headquartered in Tokyo, Japan.

From our offices in Toronto the capital city of the province of Ontario and financial and business capital of Canada, we serve private individuals and families from N. America to Europe and with our corporate trading division strategically located in Tokyo, Japan, we have unrivalled access to Asia’s high yielding emerging markets, access to corporate resources, private equity and global mergers and acquisitions.