Bibow on Helicopter Money in the FT
In the Financial Times, Jörg Bibow writes in reaction to an article by Stephanie Flanders on “helicopter money” — the idea of having the central bank directly credit citizens’ bank accounts (or, in the thought experiment, to print bank notes and drop them from helicopters) with the aim of generating increases in consumer spending.
Bibow observes that helicopter money is really just fiscal policy, properly understood, and adds that it is preferable that elected fiscal authorities actually do their job — increase spending — during a period of inadequate demand; perhaps by investing in the “energy infrastructure,” as Bibow suggests.
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The major fail of the popularizing of so-called helicopter-money is in the acceptance that it is a fiscal-monetary governmental public policy function.
There is no question that a CB computer will advance the monetary credits into the accounts of the government’s payees.
But there needs to be a corollary understanding that as governmental economic policy, the government must decide in its open and accountable budgeting process where all of the new money will be spent ….. which economists ought to glean will best serve us through introduction at the highest-velocity, lowest income sectors of the consuming public.
There is a policy of the government to increase aggregate demand to its potential, and there is no possibility of it happening with private sector spending – for whatever reason.
The spending gap is identified and then funded via governmnet ‘income’ as gain from issuing the currency.
$500 Billion Spending Gap = $500 Billion “revenue gain” to the government , spent into circulation on in the same act as spending tax revenues……. all out in the open.
It is not the role of the central bank to budget the spending. The bank receives the government’s credits and pays as per instruction. The CB is correctly operating as the bank that implements fiscal-monetary policy.
It’s not the central bank’s money that is in the helicopter, it is loaded governmental purchasing power, issued under the supreme authority of sovereignty.