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Category Archives: Fiscal policy

“Helicopter Money”


Helicopter Money [courtesy Google Images]

Helicopter Money
[courtesy Google Images]

Control of the economy is based on two sets of powers:

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1) The Federal Reserve wields the monetary powers which include control over interest rate and over the supply of currency.

2) The U.S. government wields the fiscal powers which include raising or lowering taxes, raising or lowering borrowing, and increasing or decreasing government spending on benefits, subsidies and wars.

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For the past year, we’ve heard the Federal Reserve say repeatedly that:

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1) The Federal Reserve has exhausted its monetary powers and is no longer capable of using previous, “conventional” monetary strategies like QE (Quantitative Easing; printing and injecting more currency into the economy) and ZIRP (near-Zero Interest Rate Policy) to stimulate the economy back to a “recovery”.

I believe the Federal Reserve’s claims that it’s currently helpless to do much more to “stimulate” the economy with monetary policy are true.

If the Fed’s not fibbing, then only the U.S. government remains to engineer an economic “recovery” by means of its fiscal policy. However,

2) The U.S. government is unwilling or unable use its fiscal powers to raise taxes and/or borrow more currency to provide enough additional “stimulation” to cause an economic recovery.

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“Worth A Shot” Economics


Janet Yellen: the Fed's "It's Worth A Shot" Gunslinger [courtesy Google Images]

Janet Yellen: the Fed’s “It’s Worth A Shot” Gunslinger
[courtesy Google Images]

Casey Research recently published an article entitled “Let’s Try Giving out Free Cash”. Well, that certainly sounds like an idea that could catch on with the general public. But what’s it all about?

It’s about government trying to stimulate the economy by handing out free “helicopter money” directly to all the people rather than to the “too big to fail banks”.

Casey Research explained:

 

“Economist Milton Friedman coined the term “helicopter money” in the 1960s. He said that in the event of an economic contraction, the government could drop free cash from helicopters to stimulate the economy. People would spend the free money, causing the economy to grow. Friedman likely never took the cartoonish idea seriously. However, last week, former Fed chairman Ben Bernanke said helicopter money could be worth a shot.”

Gee, there’s a slogan sure to inspire public confidence: “Helicopter money—it’s ‘worth a shot!”

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