The helicopter money policy, by contrast, keeps government almost completely out of the picture. It distributes resources directly to citizens, with no limits on how they can spend it, thereby strengthening individual choice and the private sector, not government bureaucracies. It’s a stimulus Milton Friedman could love. And if everyone gets the same-sized check, there’s not even a concession to the god of progressivity—it’s like a flat tax in reverse! There will be a Republican president again someday, and as we’ve seen, it is highly likely that government will face the same weak growth and high unemployment we face today. This is a tool as friendly to the conservatives’ ideology as they are likely to find. Federal Pell Grant New York
And that turned out to have some awful side effects, since the rich disproportionately save their money rather than spend it. But they don’t save by piling up huge pyramids of cash like Scrooge McDuck, they “save” by buying financial assets—which means that most of the fruits of economic growth have been channeled into asset price increases, rather than consumer price inflation. That partly explains the tendency toward bubbles. All of the recessions since the start of the Great Moderation were caused by collapsing asset bubbles: the savings-and-loan crisis of the late ’80s, the dot-com stock bubble in the 2000s, and the housing bubble in 2007. But that’s not the worst of it. After the early ’80s, the Fed’s interest rate tool seemed to become progressively less effective. While it was working, they had to keep turning the Fed funds rate down and down and down again (see Graph 2). Free Money For Nonprofits
The first is to push interest rates below zero. The idea here is fairly simple. If the problem with our economy is framed in terms of people trying to save too much relative to their spending, then negative interest rates would make saving money expensive. If you kept cash in a savings account with a negative interest rate, you would actually lose money. There are a few major problems with this idea, one of which is cultural. We Americans consider saving virtuous; a Fed policy that punished savers would simply not go over well. Another problem is that if interest rates on money were sharply negative, investors might just pour their money into commodities like wheat, oil, or copper as a store of value, which would keep those raw materials from socially positive uses and be tough to regulate. Yet another problem, which the economist Miles Kimball (an advocate of this idea) points out, is that if we really wanted to make this work, all money would have to be subject to interest rate fluctuations, which means we’d have to get rid of paper money. (If everything were electronic, there would be nowhere for savers to hide.) Federal Grant Restrictions

The third policy option is known as nominal gross domestic product targeting, the major proponent of which is the economist Scott Sumner. The idea is all about self-fulfilling expectations. Recall that the central bank owns the printing press, so it can create arbitrary quantities of dollars. By making a pre-commitment to keep the economy on a particular spending trajectory, self-fulfilling collapses in spending would not happen. Something similar to this policy seems to have kept Australia and Israel out of the Great Recession. But in order to sustain such a policy, the Fed might have to intervene in the economy quite frequently, and then the distributional consequences could be serious. Quantitative easing, for example, helps push up asset prices (the stock market has regained all the ground lost since 2009 and then some), which disproportionately benefits the wealthy. Free Money Machine
×