Calling All Helicopters

With the prices of everything from stocks to bonds to oil, gold, copper and other commodities plunging, the markets clearly rate the monetary and fiscal response so far underwhelming. The Fed is letting the Treasury market get away from it when it most needs the support.  With demand for dollars skyrocketing, supply needs to catch up to quell deflation.

The presently proposed helicopter money plan seems puny in relation to the scale of the problem. Sure, $500B is better than nothing, but this is a multi-trillion-dollar problem. It’s not as if getting dollars to people takes them away from businesses and other institutions. Individuals are going to use them to buy things and pay debts, sending them into the system from the ground up. And the money will be allocated according to what people need most.

There should be no need for trying to fine tune it; every man, woman and child should get the same amount. From Billy Sixpack to Bill Gates. Politicians worried about giving money to those who already have it can turn to the income tax system for progressivity or social engineering.  Those who still have substantial incomes will be sending more back than they get.  The UBI progressives have been promoting looks at it this way. Right now the important thing is getting the dollars out there fast. And something on the order of $1000 for each citizen and taxpayer for a few months wouldn’t be too much. At a population of 300,000,000 or so, six months worth would amount only to around $2T. If another $2T were allocated to targeted programs, it would still total less than the size of the Fed’s current balance sheet.  

Implementation is logistically straightforward.  The Fed buys securities directly from Treasury (along with whatever else is necessary in the open market to stabilize prices), and Treasury cuts the checks, much as it does when issuing tax refunds or paying Social Security benefits.  This also leaves both the Fed and Treasury in their proper respective monetary and fiscal roles.  

Why not?  It’s bad enough the world is dealing with the most serious plague in over a century without having to simultaneously cope with a deflationary crash and potential financial apocalypse.

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