Future policymakers might choose to consider some additional tools that have been employed by other central banks,” Federal Reserve Board Chair Janet Yellen said in a widely watched speech in Jackson Hole, Wyoming, on Friday. She was referring to a number of possible monetary steps to help the economy, including potentially the much-debated notion of “helicopter money.” So what is helicopter money? It’s a basic, important policy concept with a truly awful name.
The term essentially refers to a fiscal stimulus that is explicitly funded by newly created money from the central bank, a permanent new injection of funds directly into immediate government spending. Now, the idea that governments, with or without the help of central banks, should spend substantial resources on creating jobs, both directly and through private sector incentives, is widely accepted among economists across the political spectrum. However, calling what might be a perfectly justified period of direct cooperation between the fiscal and monetary authorities during a period of acute economic weakness “helicopter money,” as proponents of the policy have done, almost certainly dooms it to failure…..