Morning Must-Read: Nick Rowe: Helicopter Money without the Helicopter

Nick Rowe: Helicopters, redemption, and the target: “What makes helicopter money truly helicopter money…

…is the announced increase in the price level target or NGDP level path target that accompanies the helicopter. ‘Helicopter money’ with no change in the target is not like Willem Buiter’s helicopter money, because that extra ‘helicopter money’ will need to be redeemed at some (unknown) time in the future, at the same future price level as before, and so the ‘helicopter’ increases the real value of government liabilities. Furthermore, if the central bank announces an increase in the NGDP level path target, that reduces the real value of government liabilities, and this converts some of the previously existing money into helicopter money ex post facto. You don’t need the helicopter. If the government halves Pm, it converts half the money that already exists into helicopter money…