Expanding the ways and means account. Have we become Zimbabwe? Are we going to get Zimbabwe like outcomes? No.

This is the move by HMT to instruct the BoE to loan it electronic reserves, which it can use to fund its programs, rather than having to wait for the Debt Management Office to sell gilts at its auctions.

This surprised me, as the coverage at recent auctions was good. Much more demand than supply, in other words. No doubt bouyed by knowing that the BoE would be there buying at pace in the secondary markets, so investors could carry them for a bit and sell them on.

In a literal sense it is 'monetary financing'... it's the creation of money to meet government financing needs. But it is intended, and may well prove to be temporary.

The temporariness of 'monetary financing' is sometimes moot: the BoE insisted QE would be temporary in 2009. But here we are with none of it reversed before the new tranche prompted by covid19 began.

Of course there were reasons: regulatory changes, the risk environment.. increased the demand for liquidity. Some of the asset purchases [flip side of money supply increases] could not be reversed as they were simply accommodating increases in money demand.

And the trajectory of the recovery was too weak to allow the BoE's MPC to embark on [much] monetary tightening. So the balance sheet expansion persisted.

The issue of substance at the root of this is not the temporariness of the operation, but whether it represents a subordination of monetary policy objectives in favour of fiscal objectives; or even if not whether it portends one in the future.

This of course is hard to tell. We cannot peer into anyone's souls. The government is unlikely to say 'we have subordinated monetary policy for now' even if it has. My assessment would be that what they are doing is perfectly consistent with monetary policy at the moment.

A delay in getting money to people through the covid19 support programs, or a default, could trigger a full on financial crisis, with risks of substantial deflation or inflation, and a protracted recession, neither of which would be consistent with monetary policy mandate.

So, is this the sound of helicopters whirring? No one can really say. The temporariness of the balances in the Ways and Means account will be an indicator. What the MPC choose to say about it will be another.

Of course, the reason why dipping your hungry fingers into the Ways and Means account is frowned on is partly because it is hard to to tell why you are doing it, and it is good to avoid generating the impression you are permanently monetary financing when you don't intend to.

And it's an indication therefore of the extraordinary pressures on government that niceties like 'it would be good to virtue signal to the markets that we are not monetary financing by not doing this' have to be set aside.

So back to the original question. Are we on the way to Zimbabwe. Not yet. There are perfectly good reasons to expand the overdraft on the Ways and Means account.

[Just putting it like that reminds you of one of the bad ones, which is that some benefit is derived from most people not knowing what on earth this means. It is not named 'The Helicopter Account' for a reason].