Why ‘Helicopter Money’ Will Not Help Us Out of This Mess

 Why ‘Helicopter Money’ Will Not Help Us Out of This Mess
Why ‘Helicopter Money’ Will Not Help Us Out of This Mess

Imagine getting up one morning and finding helicopters hovering over the neighborhood. They are showering down cash on the community. All one has to do is go and pick up an allotted amount. Such a prospect might seem too good to be true. However, in these chaotic times, it might become the new normal.

The concept is called helicopter money. Nobel Prize-winning economist Milton Friedman coined the term in 1969 to envisage how sudden increases in money supply universally distributed would affect spending and saving. His conclusions were not favorable. No one took it seriously at the time. Everyone agreed that it should be avoided.

Calling in the Choppers in a Time of Crisis

However, some people now think it will help get the country of the present mess. It seems like an ingenious way to get the money in the hands of those who need it.

Free Book Return to OrderFree Book: Return to Order: From a Frenzied Economy to an Organic Christian Society—Where We’ve Been, How We Got Here, and Where We Need to Go

 

However, free helicopter money is a sign of desperation. Since the 2008 sub-prime mortgage crisis, the Federal Reserve has resorted to a toolkit of money injection instruments to prime the economy. This has included low near-zero interest rates and massive central bank purchases of government bonds, called quantitative easing. The COVID crisis has only increased the pressure to free up money to “stimulate” the economy and prevent collapse. However, there are few tools left in the Fed’s toolbox.

Hence, everyone is turning to helicopter money in the form of universally issued stimulus checks. The thinking behind this is that government spending is not enough. It is time to be daring and give the cash directly to consumers so they might rush out and spend it. Increase demand for more products will jumpstart the industry into producing more goods. The economy will soon be humming again—and voters will gratefully reward legislators who thought of them in their time of need.

The choppers are now visiting neighborhoods with ever-increasing frequency. This strategy is cited as an economic plan. It should instead be called what it is: a cheap vote-buying scheme.

Helicopter Money Doesn’t Work

However, helicopter money does not work. The proposed next round of $1,400 checks will do exactly what other such checks have done. They will have a negligible impact on the economy and increase federal debt.

Help Remove Jesus Bath Mat on Amazon

If the next checks are approved, the federal government will have handed out $900 billion in COVID helicopter money. That is more than America’s 2020 defense budget! And it is all conveniently put on the federal tab for future generations to pay.

The reason why free cash does not work is that people tend to spend money based on their long term income projections. If given a one-shot boost, many people will either save the money or pay down debt, which does little to stimulate production. Researchers found that only 15 percent of Americans spent most of the $1200 checks issued last spring.

Such payouts have been tried in the past with little to show for them. Presidents Ford, Carter, Bush II and Obama all sent in the helicopters in one form or another. None of their efforts achieved stimulus goals and ultimately hurt the poorest people by slowing down recovery. Based on past evidence, Hoover Institute fellows John Cogan and John Taylor reaffirm that “they did not work then and they are not working now.”

Damn the Torpedoes, Full Steam Ahead!

Despite the proof that this chopper cash part of the stimulus does not work, liberals are throwing caution to the wind. “Damn the torpedoes, full steam ahead!” is the advice of The New York Times economist Paul Krugman. Open up the floodgates, and let helicopter money flow to individuals, state and local governments.

Satanic Christ Porn-blasphemy at Walmart — Sign Petition

Such advocates believe in what they call Modern Monetary Theory or MMT. They say that government deficit spending does not matter for countries like the United States that borrow in their own currency. Governments can issue (print) money indefinitely using mechanisms like the Federal Reserve to self-finance their inflated budgets.

Advocates even claim that borrowing now is a bargain since interest rates are near zero. On December 7, The Washington Post columnist Charles Lane wrote that “Far from burdening future generations, governments have a golden opportunity to fund long-standing needs by borrowing for investments in future prosperity—the list includes child care, early education, job training and clean water”—and helicopter money. Lots of it.

The MMTers further argue that since textbook solutions to problems do not seem to be working anyway, increased debt is no cause for concern. The sky has not fallen over the last decade when it should have collapsed by all the old standards.

No Substitute for Sound Economics

However, many economists claim that the sky has not fallen due to many artificial factors. Not least among them are the multi-trillion dollar purchases of Treasury and agency securities by the Fed’s quantitative easing programs. This move artificially injects money into the economy and kicks the can of reckoning down the road.

There is no substitute for good economics. Fancy theories like MMT’s helicopter money may produce immediate short-term jolts. However, the overall effect will always be detrimental and hold back recovery. Messrs. Cogan and Taylor claim that “on the longer run, fiscal policy should focus on controlling federal spending. Continued spending increases are an impediment to economic growth.”

How Panera’s Socialist Bread Ruined Company

The problem with helicopter money is that it is not an economic issue since it does not make financial sense. Although politicians take advantage of the crisis to rain down benefits on voters, it is not entirely a political problem.

Helicopter money is a moral problem. People have the frenetic intemperance of wanting everything instantly and effortlessly. They are willing to break every economic rule and political protocol to obtain the fullness of their desires. The idea that work or effort is attached to money causes them pain.

[like url=https://www.facebook.com/ReturnToOrder.org]

Until this moral problem is resolved, helicopters will keep showering down money to the nation’s ruin.

© Adobe Stock/PikePicture