TradeBriefs Editorial

From the Editor's Desk

We Need to Start Tossing Money Out of Helicopters

That whrrrrr sound you hear is the Federal Reserve's money printer firing up. The emergency public-health measures necessary to curb the spread of the novel coronavirus have thrown the economy into an unprecedented recession, one that threatens to become a second Great Depression if the government does not provide enough aid to businesses and families. Forecasters now anticipate that GDP will contract at a 24 percent rate in the second quarter, and that unemployment might swell as high as 41 percent, quadrupling the highest rate during the Great Recession.

The Fed has responded by pushing interest rates to zero, announcing an open-ended asset-buying program, and opening an array of lending facilities to keep markets liquid and calm. It's doing everything it did in the Great Recession, and much faster. For its part, Congress has passed three coronavirus aid bills, the latest worth some $2 trillion. That still might not be enough. The Fed knows it might not be enough. Congress knows it might not be enough.

What might be enough? Helicopter money - a term that comes from a Milton Friedman essay in which the Fed tosses money ... out of a helicopter. Put in a more technical and accurate manner: fiscal-monetary coordination or even outright debt monetization. Put in a manner regular people might understand: Get the central bank to create money and Congress to spend it.

Continued here

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