Helicopter Money

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lpm
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Helicopter Money

Post by lpm » Wed Mar 18, 2020 2:42 pm

Money is an illusion. Resources are real.

"Helicopter money" is a famous thought experiment by Milton Friedman - what would happen if you printed loads of bank notes, flew over a town in a helicopter and shoveled them out? How would the recipients respond and what happens to real resources and what happens to the value of money?

In the real world today, you don't bother with the printing presses, you just create money electronically at the Bank of England and transfer it into bank accounts.

Today there is a need for everyone to get £100 a week, a Universal Basic Income. It would guarantee that everyone can buy food and basic necessities. (Rents, mortgages, utilities etc can be covered by payment holidays).

It's incredibly hard to say what the impact on the economy is. It's strong medicine - exactly what led to hyper-inflation in Weimar and Zimbabwe. A fair bit of inflation would be lovely right now, to destroy debt, but overdo it and... Just because people have money does not mean they can buy resources. I'm pretty sure that helicopter money is needed at some point - but maybe not now. It certainly would have more oomph at the end of the crisis, the kickstart to get the economy humming again. Then again, people need it now.

Another alternative is to do it like a student loan. Everyone gets £100 a week for a year. It is repayable - but only repayable for those with an income of over £25,000. Ends up being an extra tax on those earning over £25,000, millions would never repay a penny.
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Bird on a Fire
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Re: Helicopter Money

Post by Bird on a Fire » Wed Mar 18, 2020 3:27 pm

I think ensuring that people can access resources, at least important ones like food and clothing, will be an immediate priority for reasons other than economic impact. Mobilising people able to work will save a certain number of jobs.

But yes, I think the bailout will have to be helicopter-ish. There simply isn't time to calculate who has sufficient savings, who is able to continue working the same number of hours, who has manageable monthly outgoing and who doesn't. We need freezes on expenses, backed by governments, and ensuring a basic income.

The approach in 2008 in a lot of places focused on stabilising big businesses, especially those in the financial sector. That was the wrong approach then, but would be even wronger now. Supply chains for key resources absolutely depend on small businesses, especially those upon which vulnerable people are disproportionately reliant - local shops, delivery drivers (who are generally in the gig economy), community-based organisations that depend on people being able to give their time.
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Re: Helicopter Money

Post by plodder » Wed Mar 18, 2020 4:00 pm

Make the boomers pay for it. They've hoarded all the asset wealth and spunked the state's wealth up the wall for decades, and we're only dicking about with self isolation and the economic depression it'll cause young people in order to stop them croaking it a few months earlier.

</not entirely serious>

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Re: Helicopter Money

Post by Bird on a Fire » Wed Mar 18, 2020 4:06 pm

plodder wrote:
Wed Mar 18, 2020 4:00 pm
Make the boomers pay for it. They've hoarded all the asset wealth and spunked the state's wealth up the wall for decades, and we're only dicking about with self isolation and the economic depression it'll cause young people in order to stop them croaking it a few months earlier.

</not entirely serious>
I don't think it's sensible to focus on revenge, or righting past wrongs. We just need to find the most sensible and humane approach for going forward.

Losing a huge number of the older generation would be a tragedy that we should avoid, regardless of how that generation en masse has totally shat the bed on environmentalism, the economy, politics etc.

But restoring a sense of normality to society will depend on restoring the spending of income by the majority, not on protecting wealth that was unwisely invested in enterprises that failed to future-proof against the inevitability of unprecedented environmental disasters in this decade.

[/taking your post too seriously]
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Re: Helicopter Money

Post by Pucksoppet » Wed Mar 18, 2020 4:16 pm

lpm wrote:
Wed Mar 18, 2020 2:42 pm
Money is an illusion. Resources are real.

"Helicopter money" is a famous thought experiment by Milton Friedman - what would happen if you printed loads of bank notes, flew over a town in a helicopter and shoveled them out? How would the recipients respond and what happens to real resources and what happens to the value of money?

In the real world today, you don't bother with the printing presses, you just create money electronically at the Bank of England and transfer it into bank accounts.

Today there is a need for everyone to get £100 a week, a Universal Basic Income. It would guarantee that everyone can buy food and basic necessities. (Rents, mortgages, utilities etc can be covered by payment holidays).

It's incredibly hard to say what the impact on the economy is. It's strong medicine - exactly what led to hyper-inflation in Weimar and Zimbabwe. A fair bit of inflation would be lovely right now, to destroy debt, but overdo it and... Just because people have money does not mean they can buy resources. I'm pretty sure that helicopter money is needed at some point - but maybe not now. It certainly would have more oomph at the end of the crisis, the kickstart to get the economy humming again. Then again, people need it now.

Another alternative is to do it like a student loan. Everyone gets £100 a week for a year. It is repayable - but only repayable for those with an income of over £25,000. Ends up being an extra tax on those earning over £25,000, millions would never repay a penny.
You read my posting on the Brexit thread, didn't you? Either that, or serendipity.

That said, giving everyone money, repayable later if you earn above a certain threshold, as you say, sounds like an excellent idea.

Dealing with people right at the margins, with no bank accounts; and those with (expensive) special needs are details that would need to be worked out. Inflating away debt would be regarded as no bad thing by many: but it would also make bond-backed pensions valueless (asset-backed ones might survive in some form, although most, if not all cap the annual 'index-linked' increase). The effect on pensions might be popular in some sections of the population.

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lpm
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Re: Helicopter Money

Post by lpm » Wed Mar 18, 2020 4:19 pm

Inflation does a lot of that, as an invisible hand. Juicy pensions get burned away, house prices fall (in real terms), share portfolios are obviously already trashed by 30%.

One problem, though, the pandemic will eradicate a load of small local businesses and shops - leaving the mega-corporations with even more room to run rampant.

ETA: ninjaed on a bit by Puck
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Re: Helicopter Money

Post by Bird on a Fire » Wed Mar 18, 2020 4:24 pm

We might have to rethink pensions (and care for the elderly generally, but that's for another thread). For example, ensuring that the state pension is liveable might be a more effective strategy for protecting vulnerable elderly people than securing entire markets just to protect pensions.

ETA Pucksoppet's post in the Brexit thread is absolutely correct that we should prioritise rapidity of response over pettifogging concerns over benefit cheats. There are much more important systemic inefficiencies, such as the proportion of QE that ends up in tax havens rather than recirculating within the target economy. At least benefits cheats spend their money in the local economy, employing Wetherspoons staff and scratchcard vendors and so on.
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Re: Helicopter Money

Post by bmforre » Wed Mar 18, 2020 8:24 pm

Carl Barks
used a tornado to distribute Scrooges money across the land.

It would have taken an awfully big helicopter to provide comparable distribution.

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Re: Helicopter Money

Post by lpm » Fri Mar 20, 2020 5:24 pm

Wow.

I'm glad to finally see a properly left wing government. First of my life time.

And not the silly Corbynesque left wing, either. Instead, this is extreme Blairism - pouring money into supporting the people.

Johnson's complete lack of political beliefs is a great asset at this moment.
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Re: Helicopter Money

Post by plodder » Sat Mar 21, 2020 9:12 am

Agreed, this is pretty radical sh.t right now. Paving the way for disaster capitalism, obvs.

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Re: Helicopter Money

Post by Hunting Dog » Sat Mar 21, 2020 4:12 pm

lpm wrote:
Fri Mar 20, 2020 5:24 pm
Wow.

I'm glad to finally see a properly left wing government. First of my life time.

And not the silly Corbynesque left wing, either. Instead, this is extreme Blairism - pouring money into supporting the people.

Johnson's complete lack of political beliefs is a great asset at this moment.
Yup - apparently it's now possible to fix homelessness after all!

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