Some Urge Banks To Drop “Helicopter Money”

The term was coined by Milton Friedman decades ago, but after Ben Bernake used it in 2002 his critics pinned it to him. It refers metaphorically to a government economic strategy involving an extreme increase in the money supply, a strategy that some argue may become a necessary fix to a dangerous economic problem: deflation. According to Friedman, failure of the central banks to supply enough money was what allowed deflation to take hold and became a major cause of the Great Depression of the 1930s, or at least a cause of its persistence. In a New York Times column, economic writer Neil Irwin says that some economists now argue it’s time, particularly in Japan, to implement the controversial policy, i.e. drop helicopter money, and that other countries will be watching carefully, as some analysts see deflation as a potential threat worldwide. There are significant differences between what the U.S. central bank has been doing for years, often described as “quantitative easing,” and the more extreme process whereby the government, not the banks, drops the money. With the latter, he points out, comes another potential threat. Look to recent events in two countries, Zimbabwe and Venezuela, to understand what that’s about.