An Update On Ben Bernanke’s Helicopter…

A quick google image search reminds me that “Helicopter Ben Bernanke” is a nickname that he’ll never live down:

The consensus is that the name came about as a result of a speech he gave in 2002, in which he said:

Each of the policy options I have discussed so far involves the Fed’s acting on its own. In practice, the effectiveness of anti-deflation policy could be significantly enhanced by cooperation between the monetary and fiscal authorities. A broad-based tax cut, for example, accommodated by a program of open-market purchases to alleviate any tendency for interest rates to increase, would almost certainly be an effective stimulant to consumption and hence to prices. Even if households decided not to increase consumption but instead re-balanced their portfolios by using their extra cash to acquire real and financial assets, the resulting increase in asset values would lower the cost of capital and improve the balance sheet positions of potential borrowers. A money-financed tax cut is essentially equivalent to Milton Friedman’s famous “helicopter drop” of money.

Given this, I have questions…first, since “anti-deflation” and “inflation” are essentially the same, I’m not sure why this is terribly controversial, at least as far as economic effects are concerned. (hint: printing money generally leads to inflation in the long run) Second, why is it “Helicopter Ben” and not “Helicopter Milton?” At the risk of sounding like a cranky 5-year-old, he started it:

Let us suppose now that one day a helicopter flies over this community and drops an additional $1,000 in bills from the sky, which is, of course, hastily collected by members of the community. Let us suppose further that everyone is convinced that this is a unique event which will never be repeated.

To be fair, I’m pretty sure Friedman only intended for this to be a thought exercise, not an actual means by which to increase the money supply and stimulate the economy, whereas subsequent economists have taken it somewhat more literally. In case it’s not clear, Federal Reserve policy usually operates by buying and selling stuff from banks with newly created money, so the difference with the helicopter thing is that people and not banks pick up the money and spend some of it, which starts a virtuous cycle of economic activity. (This is how it eventually got the name “quantitative easing for the people.”)

If we take the helicopter thing less literally, Bernanke would likely argue that Keynes started it:

Keynes, however, once semi-seriously proposed, as an anti-deflationary measure, that the government fill bottles with currency and bury them in mine shafts to be dug up by the public.

I guess, in a way, sure…but what sort of sadist was Keynes? (happy birthday sir, by the way) “We could do a monetary expansion by just handing cash to people, OR…how about if we take the effort to package it and distribute it in the most annoyingly labor intensive, uncertain, and potentially dangerous way possible?” But I digress…

Back to Ben…I’m willing to keep doing the “Helicopter Ben” thing if we can get a Kickstarter funded for this:

Also, I think we finally found where Ben’s helicopter drops take place:

*plans road trip* Who’s with me????

Update: Apparently I have good timing, since here’s some Bernanke talking about quantitative easing from, like, right now.

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