Why Do We Talk About “Helicopter Money”?
Why do we talk about “helicopter money”? We talk about helicopter money because we seek a tool for managing aggregate demand–for nudging the level of spending in an economy up to but not above the economy’s current sustainable productive potential–that is all of:
- Effective and successful–even in the very low interest rate world we appear to be in.
- Does not excite fears of an outsized central bank balance sheet–with its vague but truly-feared risks.
- Does not excite fears of an outsized government interest-bearing debt–with its very real and costly amortization burdens should interest rates rise.
- Keeps what ought to be a technocratic problem of public administration out of the mishegas that is modern partisan politics.
Right now the modal projection by participants in the Federal Reserve’s Open Market Committee meetings is that the U.S. Treasury Bill rate will top out at 3% this business cycle. It would be a brave meeting participant who would be confident that we would get there–if we would get there–with high probability before 2020. That does not provide enough room for the Federal Reserve to loosen policy by even the average amount of loosening seen in post-World War II recessions. Odds are standard open market operation-based interest rate tools will not be able to do the macroeconomic policy stabilization job when the next adverse shock hits the economy.
The last decade has taught us that quantitative easing on a scale large enough to rapidly return economies to full employment is one bridge if not more too far for central banks as they are currently constituted–if, that is, it is possible at all. The last decade has taught us that bond-funded expansionary fiscal policy on a scale large enough to rapidly return economies to full employment is at least several bridges too far for our political systems, at least as they are currently constituted.
If we do not now start planning for how to implement helicopter money when the next adverse shock comes, what will our plan be? As a candidate for a tool capable of doing all four of these things, helicopter money–giving the central bank the additional policy tool of printing up extra money and either mailing it out to households as checks or getting it into the hands of the public by buying extra useful stuff–is our last hope, and, if it is not our best hope, then I do not know what our best hope might be.
- Ben Bernanke: What Tools Does the Fed Have Left? Part 3: Helicopter Money
- Ben Bernanke (2000): Japanese Monetary Policy: A Case of Self-Induced Paralysis?
- Alan Blinder (2000): Monetary Policy at the Zero Lower Bound: Balancing the Risks
- Willem Buiter: EU and China Ought to Use Helicopter Money
- Gabriel Chodorow-Reich and Johannes Wieland: Secular Labor Reallocation and Business Cycles
- Marcus Tullius Cicero: To Atticus
- Bradford DeLong and Lawrence H. Summers (2012): Fiscal Policy in a Depressed Economy
- Brad DeLong (2008): The Republic of the Central Banker
- JMCB (2000): Monetary Policy in a Low-Inflation Environment
- Stephanie Flanders: The Hurdles to ‘Helicopter Money’ Are Shrinking
- Robert Gordon, ed. (1975): Milton Friedman’s Monetary Framework: A Debate with His Critics
- Neil Irwin: Helicopter Money: Why Some Economists Are Talking About Dropping Money From the Sky
- Koichi Hamada: Money from Heaven?
- Michael Heise: The Case Against Helicopter Money
- Paul Krugman (2013): Helicopters Don’t Help
- Paul Krugman (1999): It’s Baaack: Japan’s Slump and the Return of the Liquidity Trap
- Paul Krugman (1999): The Return of Depression Economics
- Eric Lonergan: Helicopter Money Is Different
- Eric Lonergan: A Brief Reply to Paul Krugman on Policy Equivalence
- Adair Turner: Helicopters on a Leash
- Adair Turner (2015): The Case for Monetary Finance—An Essentially Political Issue
- Adair Turner: The Helicopter Money Drop Demands Balance
- Jacob Viner (1933): Balanced Deflation, Inflation, or More Depression
- Simon Wren-Lewis: Helicopter Money and Fiscal Policy
- Simon Wren-Lewis: Helicopter Money: Missing the Point