E Saving The Economy: NGDP Targeting For The People

No, the helicopter money advocated by Beckworth would be based on treasury bonds in exchange. That would be a sterilized action, not inflation causing. Once the target of money in supply was met, the injections into the accounts of Americans would cease until the next downturn. Even the Brits like Beckworth's proposals:

 

As noted above, the framework we are working with is similar to models outlined in Turner and Woodford (2013), Beckworth (2013), Woodford (2012) and Avent (2013) – ours is most conceptually similar to Beckworth’s; though it is still conceptually slightly different to all of the above. 

 

A third form of helicopter money calls for the Treasury to sell bonds to the public and then transfer the proceeds to everyone's account individually. That would not be base money from the Fed. It would be proceeds from bonds sold. But that program would depend upon the bonds sold.

The Trump tax plan may incorporate a similar fiscal, not monetary, stimulus, raising the standard deduction for main street families until later when the economy presumably would be stronger. That seems like a brilliant plan until we see that the shrinking of Social Security as an offset robs Main Street with the other hand. And no, it is not that hand of self interest. It is the hand of greed. And it is also going to increase the deficit. That could have benefits, in the production of more treasury bonds, as long as it doesn't get out of control.

And, that concept is only a temporary tax reduction, unless you are already swimming in money. So, once people find out their taxes will go up they may choose not to spend. And for many, this tax reduction will be offset by limitations on housing deductions. This is a direct attack on blue state middle class folks, who fund the red states. What is POTUS thinking?

It is clear that Lonergan's helicopter money is the safest and simplest manifestation of the idea. And watching NGDP should be a mandatory activity of the Fed. Lonergan's plan could be the least hurtful to the government, with only the Fed's balance sheet increasing instead of the government deficit, but with no added bonds. Bond shortages in collateral activity are an issue.

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Disclaimer: I have no financial interest in any companies or industries mentioned. I am not an investment counselor nor am I an attorney so my views are not to be considered investment advice. The ...

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Norman Mogil 3 years ago Contributor's comment

I bet if Milton Friedman were here today, he would advocate a squad of helicopters fly over the world dropping money of every kind in every country. The issue is whether this would lead to greater spending or greater savings.?

Gary Anderson 3 years ago Author's comment

Well, it would be money dropped to those who would likely spend it, prof. If people saved that would impact the money supply differently so Beckworth's plan could provide an ongoing remedy.