It’s like a design competition. Hardly anyone thinks central banks can fix a stalling world economy with their current tools. So some of the biggest names in finance are trying to invent new ones.

The proposals so far -- including recent entries by billionaire Ray Dalio and monetary policy maven Stanley Fischer -- have one thing in common: They foresee the once all-powerful central bankers taking a more junior role, and collaborating with governments.

That type of stimulus used to be taboo, in part because it risks eroding the independence from politics that monetary policy makers prize -- and President Donald Trump is already threatening. History is littered with cautionary tales in which blurring the lines between central bank and Treasury coffers led to runaway inflation.

But right now, deflation is the big threat. An emerging consensus says the next downturn may need to be fought with direct and permanent injections of cash –- often called “helicopter money’’ -– and that central banks can’t deliver it alone.

‘Pushing on a String’
The monetary policy makers can encourage private actors to spend or invest, by making it cheaper to borrow. By historical standards, though, interest rates are near rock-bottom already and the credit cards of households and businesses are pretty maxed out. In the low-rates era, it’s mostly been governments doing the borrowing.

What’s resurfacing is “the old idea of monetary policy sometimes pushing on a string,’’ Lawrence Summers, a former U.S. Treasury secretary and now Harvard University professor, told Bloomberg Television recently. “We’ve got to think much harder, for economic stabilization, about mechanisms that involve spurring demand directly.’’

That’s code for involving fiscal policy. Via their budgets, governments don’t have to push the string –- they can open the taps, spending directly into the economy or boosting the purchasing power of consumers or companies by cutting taxes.

The new thinking says central banks can get in on this act too –- an idea, known in the jargon as fiscal-monetary cooperation, that economists are now trying to flesh out. It could solve problems, and maybe create some new ones, on both sides.

Governments have been criticized -- often by those overseeing monetary policy -- for being slow to deliver fiscal support, which typically needs approval by hundreds of lawmakers who may worry about adding to national debts. Central banks can act faster.

The banks would get their hands on some powerful new instruments. But they’d likely have to accept that independence from politicians –- jealously guarded, especially in the age of Trump’s frequent attacks on the Federal Reserve and its chairman Jerome Powell -– has limits.

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