E Pros And Cons Of Helicopter Money - Bernanke Misunderstood

I thought it might be interesting to look into the pros and cons of Helicopter Money. After all, Ben Bernanke earned the title, "Helicopter Ben", for discussing the concept back in 2003. I have criticized the Fed, and Bernanke himself, severely both here, and here, but with regard to Helicopter Money, I don't think that a true understanding would cause most to have a strong concern. I think Bernanke has been misunderstood about this important issue. But there are pros and cons to the process, so they are discussed here.

Helicopter money is generally thought by the uninformed as Fed base money deposited directly into the bank accounts of ordinary citizens, or all citizens. It will not work that way, although theoretically it could. It is more likely that tax cuts would be implemented and/or infrastructure could be targeted for repair.

Helicopter money seems to be a fair way to bail out main street, since a form of Helicopter Money for banks, called Quantitative Easing, or QE  has bailed out the banks through the purchase of treasury bonds and bad paper, MBSs. But as we will see, there are good and bad benefits attached to the concept and maybe we can look at some of these pros and cons.

The goal of Helicopter Money is purely economic, to boost aggregate demand, or AD. Helicopter Money is contemplated when regular monetary policy, like QE, fails to provide the boost needed to support the economy.

With regard to the USA, the need for Helicopter Money as a means of stimulating the economy could be low at this time, according to Ben Bernanke. We are not in negative rate territory as is Europe and Japan. We need to watch their possible experiments with the concept to judge better the pros and cons.

Besides, Bernanke, lots of other economists have weighed in on the concept, from Kocherlakota, to Buiter, to Lonergan to Market Monetarists David Beckworth and Scott Sumner, here and here, and many more.

Pros of Implementing Helicopter Money:

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Disclosure: I am not an investment counselor nor am I an attorney so my views are not to be considered investment advice.

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