Thursday, 02 October 2014

Popular Articles

Another Step Toward Helicopter Money, And Away From Freedom

Posted by Gonzalo Schwarz
December 28, 2012

by James Dorn

The Federal Reserve’s decision to enter the New Year by extending and enlarging its policy of quantitative easing is another step toward “helicopter money”—that is, directly increasing the public’s cash balances by an injection of high-powered money.  This could be done by dropping money from helicopters or by having the U.S. Treasury print checks while the Fed printed money.  The idea is to use the printing press to stimulate the economy by directly injecting new money into the spending stream without relying on lower interest rates and the financial system.

So far the Fed has resisted the temptation to turn to helicopter money.  But in entering its fourth round of quantitative easing (QE4), the Fed will buy $85 billion worth of mortgage backed securities and longer-term Treasuries per month until expected inflation reaches 2.5 percent, or unemployment falls to 6.5 percent.  The Fed’s macroeconomic models predict those thresholds won’t be reached until mid-2015. …

Continue reading at forbes.com…

image: flickr.com/africa-renewal