Column: Why not drop money out of a helicopter?

[phantom power]

Nice to see some sanity from Duncan Black get a little exposure in the MSM.

The Federal Reserve should give people free money. People would spend this money, increasing demand for goods and services, causing employers to hire additional workers to meet this increased demand and reducing unemployment in the economy overall.

This probably sounds like a crazy idea, but it isn't. People are a bit uncomfortable with the notion that the Fed can simply create money, but that is what the Fed does. Currently, under a program dubbed "QEIII" (Quantitative Easing III), the Fed is creating money and, instead of simply giving it to people, is using that money to purchase mortgage backed securities in order keep mortgage rates low and increase the supply of money in the economy. This also boosts the prices of these financial assets, providing a windfall to those who own them.

...

They don't actually have to drop money out of helicopters, though that might be fun, but any equivalent policy would boost demand more directly than the current Fed programs. I'll be bold and suggest that this might even be a somewhat popular thing to do.

The only potential risk of this is increased inflation, though higher inflation is a potential consequence of any expansionary monetary policy, and the Fed has demonstrated its ability to reduce inflation when necessary. In any case, an additional bit of inflation would be welcome right now, as it would reduce the real values of fixed rate mortgages and help to decrease the number of "underwater" borrowers.

The Great Recession, with its long period of extended high unemployment rates, has caused unnecessary economic hardship for millions. Remarkably, there's a simple way to help people and improve the economy. Even more remarkably, we aren't doing it.

http://www.usatoday.com/news/opinion/forum/story/2012-09-25/ben-bernake-inflation-money/57840674/1

[gopiscrap]

1. Let me know when it happens

I'll be there!

[orwell]

2. Well the Fed chairman's nickname is...

..."Helicopter Ben"...

[quaker bill]

3. Only one problem

People would stop believing money was valuable if it just came wafting down out of helicopters. Once the belief in the value of money is lost, hyperinflation begins. There are very good sociological studies to back this up. Money is worth more than the recycling value of the paper only because people believe it is. This belief must be maintained, and it is precisely the job of the FED to do that.

However, handing it out liberally for something, anything people thought had value, would be just fine.

[banned from Kos]

4. The Fed is creating money equal to the mortgage assets it buys.

ITS A WASH.

One side goes into the Asset column and one into the LIABILITY column. No harm to the USD done.

[Teamster Jeff]

5. If they did drop money from a helicopter..

the 1% would devise a scheme to grab most of it before it hit the ground