Helicopter Money: Loved, Not Spent

Yves here. While Milton Friedman invented the concept of helicopter money, it was Ben Bernanke, in a 2002 speech on deflation, that brought the idea into widespread use. Bernanke claimed that a central bank could always generate inflation, and the last-ditch measure would be “helicopter money.” The original image was that of throwing money out of helicopters. The monetarist view was that people would recognize that so much extra money floating around would be inflationary and would rush to spend it before inflation kicked in….which would of course create inflationary expectations and induce inflation by increasing the velocity of money.

But what Bernanke actually proposed back then looks an awful lot like trickle-down economics, since he suggested using tax cuts, which would distribute more money to those with the lowest propensity to spend, the rich. We’ve seen how well trickle-down economics has worked in practice. This is the relevant section of his speech:

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.

And you notice that Bernanke assumed that the wealth effect will do the trick? Again, as we’ve discussed at length in older posts, the first central bank to use the wealth effect to stimulate consumption was the Bank of Japan, starting in the mid-1980s. We know how that movie ended. Yet the Fed tried that twice, first with Greenspan relying on goosing asset values in the dot-com bust, and then in the wake of the crisis, when the Fed and the Administration convinced itself that rescuing the banks and propping up housing prices and the stock market (while ignoring the devastating impact of millions of preventable foreclosures) would lead to a solid recovery. The result, instead, was the Democrats played into the hands of Trump by refusing to recognize the damage their economic policies had done and refusing back Sanders, who consistently outpolled Trump by large margins.

Back to the post below. It’s important because it tears yet another big hole in the helicopter money theory. It also confirms what economist Richard Koo said about balance sheet recessions: that when people are worried about their financial well-being (whether personally by virtue of having lost savings or seen their home price fall, or are carrying uncomfortable levels of debt, or see too many people around them in stress to feel secure), they prioritize saving over consumption even if they have the ability to spend comfortably.

By Ian Bright, Senior economist, ING, London and Amsterdam and Senne Janssen, Senior Economist, ING, London and Amsterdam. Originally published at VoxEU


  1. Watt4Bob

    I wonder if a Student Debt Jubilee, and/or the provision of Medicare for everyone wouldn’t have the exact effect that we’re all looking for?

    I’m not forgetting the displacement of Health Insurance workers, but I’m sure a lot of them not only have transferable skills, but would also reap the benefits of the move.

    1. Waldenpond

      It could if the sense of precariousness were absent. If student debt were a one off, public university funded, the awareness that parents, students and students to be weren’t going to be indebted by education again…. there is still getting indebted for housing, transportation, medical care etc. I don’t see how helicopter money can work when the majority of society is prey and they act rationally by trying to lessen the effect.

      In other words….Would you think that reducing/eliminating your student debt and having mcr for all would improve your life permanently? or short run as other oligarchs would be waiting to exploit whatever may land in your bank account through rent, interest, transportation, etc?

      1. Watt4Bob

        Having supported my wife through grad-school and two kids through under-grad studies and incurred associated debt, and, knowing/assuming I’m not alone in this situation…

        Spending about $500/mon on Health Insurance, and my employer spending a similar amount…

        (x~200 employees!)

        An obvious windfall to employers who would be relieved of the burden of providing health insurance for all their employees, and so have a reason to support my idea.

        Yes, I think the combination of eliminating student debt (not cash landing in my bank account) and relieving both myself and my employer of the cost of Health Care, (medicare for all) would permanently improve my life, my employer’s and your’s.

        Of course it goes without saying that eliminating student debt involves making higher education free going forward.

        What’s standing in the way is the contrived worship of ‘Markets’ as the only ‘rational’ mechanism for delivering the goods and services we need.

        Those oligarchs you posit as waiting to exploit my future solvency, will have a long wait, and I suspect that I’m not the only one who would not immediately put my new-found creditworthiness to the test.

        There are obvious benefits to society as a whole in these two ideas, but neoliberal ideology being what it is, they will be laughed at, scorned, and fought tooth and nail, before ever being considered.

        rent, interest, transportation, etc?

        That’s what we’re talking about re-thinking, aren’t we?

      2. UserFriendly

        I hope that wasn’t misunderstood. I’m all for it, even if it didn’t help me out as much as it would. But considering I have gotten in at least 3 separate arguments with people who went to less school than they wanted to because of $$$ who were understandably annoyed at the prospect of their frugality being punished.

  2. Jim Haygood

    Instead of asking a hypothetical question, state lotteries could survey people who actually won “helicopter money” a year later.

    How much is left (saved) a year later? Anecdotally, the answer seems to be “very little indeed.” Or “low time preference” in economist-speak.

    1. SoCal Rhino

      I’d think the amount matters. I might save 200 if dropped on me, and might save 20000 if you dropped a million on me.

    2. Lune

      I was going to make the same point :-)

      There’s a difference between what people *say* they’re going to do with money, and what they actually do. Everyone knows the “right” answer in a survey is that you’re going to save the money, invest it, etc. But actually hand them the cash and they become different people.

      I’d be much more interested in a study that looked at what people *actually* did with helicopter money (if there’s been an example of such money being given away to someone outside the financial class). I suspect a far higher share would be spent than what these surveys indicate.

      1. fosforos

        By very large measures the people who would use the money most to increase their enjoyment of life are the Italians. But you knew that already, didn’t you?

        1. Yalt

          It occurs to me that the cultural differences in how people respond to a question like this might be larger than the differences in how they would actually respond to the money. Perhaps Italians are relatively unashamed of the fact that they would like to increase their enjoyment of life?

      2. MyLessThanPrimeBeef

        I wonder if that is similar to people saying ‘I marry you not for your money, but for you?’

        “I will save the dowry money that comes with you.”

        “I swear, I won’t spend it.”

        Another question – Americans are exceptionally patriotic about saving-the-GDP-via-spending, as president Bush reminded us. Much more patriotic than Europeans (to be fair, we have one solid, united country, while they struggle with a mental concept of a United Europe).

        Of course, when you poll them just before Christmas, you will get a slightly different answer. I believe more will say they will spend.

      3. HazelO

        Here is a good case study,
        >During the GFC (1990s) the Australian Govt. gave each household a one off $800, I do not know of any follow up research, but I do know that Australia came through the crisis relatively unscathed. Obvisouly that was not the only reason, but it is credited with helping.

    3. Yves Smith Post author

      A surprisingly high number commit suicide, so you won’t get any answers from them. The suicide rate and death by substance abuse among Lotto winners is astonishingly high, basically because it exposes fracture lines in their lives. Blue collar workers often get fired because they aren’t perceived to need the work, even though their workplace was what gave them purpose. All sorts of relatives and friends demand gifts and loans and cut off the winner when they don’t get what they told themselves they deserved.


  3. Portia

    I am confused about these analyses. There are so many factors that can affect “growth” and so many areas of “growth” that can be fretted about. Is the question whether providing disposable income with Helicopter Money will or will not “disturb” some one’s idea of where their “economy” is going?

    thank you

  4. flora

    Bernanke: “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….”

    What financial segment of households was he addressing? And was that segment large enough to create the effect he described? (answer: no)

    Yves: “…the Democrats played into the hands of Trump by refusing to recognize the damage their economic policies had done….”

    I got a fund raising call from some national Dem outfit last week. I told them they lost because of economic issues and they needed to start addressing economics. Dem caller insisted economics was not the reason the Dems lost; it was GOP gerrymandering. I told them the Dems lost 85% of the counties in the country and that was not gerrymandering, that was economics. Dem caller would have none of it. In their hermetically sealed world Main Street economics plays no part in election outcomes.

    Thanks for this post.

    1. Pat

      It is apparently really really hard for them to understand that Republicans might not have been able to gerrymander so much if they hadn’t already lost the majority in those states where they got to draw the maps. And the reason they lost was that the Dems didn’t do anything to make people whole while taking care of the banks… Oops. Economics.

      I understand denial is powerful, but at some point you really do have to admit that 2 and 2 equals 4 not 1 1/2 because Republicans…If you don’t fire the person who runs the party and loses you the majority in states AND the House, you think that is acceptable to you. If you don’t prosecute the bankers stealing people’s homes that is acceptable to you. If you never really fight for voters rights that is acceptable to you. If you do little or nothing for people that doesn’t do more for corporations in the process that is acceptable to you. If you call an entire race predators you aren’t really working for their best interests. And on and on…

    2. Code Name D

      Bernanke: “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….”

      What financial segment of households was he addressing? And was that segment large enough to create the effect he described? (answer: no)

      Households like himseelf, those who make six figures and have other assets and income that they can manage.

    3. John Rose

      Please factor in the decades-long and very well financed & organized subverting of the democratic process that has been going on. I suggest reading “Dark Money”

  5. susan the other

    Here’s a weird thing. Since money is a symbol of our society and our future; our cooperation and our faith in each other – when society is mismanaged and implodes so disgracefully as it has done, destroying billions of lives and all their aspirations – then money only means more of the same misery. Money isn’t going to make a difference if society can’t figure out what it wants to be. It would be far more beneficial if we could helicopter in some good social planning. A future we can rely on. How did it happen that money usurped society? If we keep abstracting society, pretty soon we won’t even need language.

    1. craazyman

      consider all the helicopters and pilots needed for a scheme like this. It doesn’t seem reasonable to me to think it wouldn’t work. If they could fly day and night all over the country.

      But it might take too long — that’s a risk the Post doesn’t acknowledge. But in the meantime, all the investment needed making helicopters and training pilots might spark its own economic boom! From propellers to landing pontoons to glass bubble windows and all the supply chains needed for them.

      it’s easy to get confused thinking about economics — you have to really really think through the details

    2. JTMcPhee

      As I am wont to say, again and again: “What outcomes do we want from our political economy?” And if there’s no agreement on any kind of guiding principles (and I deem that pretty unlikely, given greed and pleasure and dominance), what’s the chance that there will ever be a “we” that can amass the power needed to implement and enforce those chosen outcomes?

      But *someone* chooses the actual outcomes we see — in Aleppo and Mosul and the Niger River Delta and up the Amazon and in the air of Beijing and the potable-water appetites on display in California etc., and those fokking Saudi princelings in their white girlie outfits, wrecking their Lambos and Masers and other exotica, and whole countries like Yemen, and the Israelites with their 200 to 600 nuclear weapons and whatever insanity motivates their corrupt rulers, and everyone above a GS-4 o4 -5 level inside the Beltway Bubble, and the Kochheads and Adelsons and Zucks and Bezos and Soros and on and on. And let us not forget Saint Barack and all that is attached to his Long Tail…

      Who is “we?” and why do “we” slide ever deeper into that depression in the sand, the bottom of which is the toothed and tentacled mouth opening of the Great All-Devouring Sarlaac — maybe there is some inspiration in this little bit from “Star Trek:” https://www.youtube.com/watch?v=dcLAOcutuxs

  6. Ranger Rick

    If businesses aren’t paying additional wages, government programs are gated and means-tested and helicopter money is going to pay off debt or rebuild the shattered savings rate, what alternatives do economists have to stave off the eventual collapse of consumer capitalism once the consumers have no money?

    1. flora

      off hand, I’d guess the next trick is forcing people to buy stuff; either directly – like health insurance (ACA), or indirectly by eliminating cash and introducing negative interest rates so your money becomes a ‘use it or lose it’ commodity. (‘inflation’ by edict) /s

      1. Marco

        Kinda like SNAP benefits? You can “carryover” all the DATA bandwidth you want with your Verizon plan but when it comes to FOOD…you snooze you lose.

        1. witters

          It worked too – in Australia – the “Rudd Stimulus” – we missed the GFC. Only people who hated it were “business” and Rupert Murdoch’s media. It was “unsound”. It worked brilliantly It WAS spent. But then the ‘balanced budget’ neo-libs in the ALP resumed normal policies (and Rudd went). Lesson: If its fiscal stimulus and it works – run away from it as fast as conventional wisdom will power you…

          1. Code Name D

            Odd this wasn’t mentioned in the origianl essay. It would seem to provide exactly the sort of answers he is looking for.

        2. reslez

          How quickly people forget. Bush 2 temporarily cut the payroll tax and mailed checks to just about every man and woman in the country… twice. AFAIK that money was pretty much immediately spent.

          When Obama was faced with a far worse crisis and downturn he adamantly refused to do anything similar. And nobody called him on it or compared him to what W did. No idea why.

          1. aab

            The only aspect I remember was people commenting that Bush was a smart enough politician to make sure everybody knew HE was getting them money, while whatever Obama did do was oblique and anonymous to the citizens.

            Obama really wasn’t very good at politics. I mean, he was charming and all, but he killed the party in many ways. I presume he didn’t care about that. He was doing what he needed to do to enhance his personal interests. But I think a decent career pol would not have made many of the mistakes he did. I know some of what he did were “mistakes,” but there’s no advantage to him for people not to know when he does something for them. That’s just inept. Why blow off the exchanges build-out? That just made him look bad. I honestly don’t get it, unless the explanation is the most obvious: he didn’t care about government, and he’s not good at it.

  7. NeoGeshel

    It is bizarre to me that economists expect consumers to be able to predict an inflationary effect from this type of intervention when, as a matter of demonstrable fact, the vast majority of consumers do not understand what inflation is or how it works.

    1. BillC

      Judging from their track record over the last decade or so, neither do the economists who preach the dominant neoliberal economic theology.

  8. jerry

    “But what Bernanke actually proposed back then looks an awful lot like trickle-down economics, since he suggested using tax cuts, which would distribute more money to those with the lowest propensity to spend, the rich.”

    What? All he said in the quote was broad based tax cuts. How does this equate to trickle-down economics? Tax cuts are an unambiguous positive to the economy, and exactly what we need right now.. especially for the middle class (if there is still such a thing) and the poor. The payroll tax holiday under Obama was a huge boost for people, unfortunately they decided to end it since the economy is just steaming along *eye roll*.

    1. John k

      Cutting some taxes such as FICA more beneficial than others.
      But certainly some would be saved, surprised to see so much might be.
      This shows giving money to gov for infra much better, hiring unemployed would get much higher fraction spent, plus benefit of better infra.
      How does society save for a future that has falling ratio of workers to retirees? Can’t save bread, but can fix infra now while we have a 10mm army of workers that gave up and are sitting in parents basements.
      Most critical to change back how BLS calculates unemployment to how it was done before Clinton changed it to show low numbers, would force fed to keep rates low. Trump could do this.

    2. JTMcPhee

      Tax cuts are no such thing as an “unambiguous positive” to MY economy, or that of most of My Fellow Americans — maybe you own or get paid a whole lot, and like the rest of the Owners and Banksters and such, want to be shut of ANY participation in the general welfare — plenty of evidence that “tax cuts” are of ZERO benefit to the vast majority of US citizens who don’t get paid enough or “own” enough to have any taxes to speak of (other than regressive sales and fuel taxes, which the incoming assw!pes are talking about INCREASING to fund lootable “infrastructure games.” That is straight “trickle-down economics,” which you implicitly acknowledge is a Bad Thing, “giving the Rich more money by reducing to a smaller-still nubbin any tiny bit of taxes-as-restraint-on-accumulation-of-positive-feedback-political-economic-clout” has had a huge part in bringing about the fokked-up mess that the most of us by far have to try to live in. Straight trickle-down, which is a lie from the git-go — the Rich DO NOT SPEND any increment in Still More – they accumulate, wealth and power, and the occasional island in the sun and megayacht and private jet.

      Have a nice day.

      1. jerry

        Thank you for just repeating the exact comment that I already addressed without even reading or attempting to comprehend what I’m saying. Bernanke didn’t say tax cuts for the rich, he said BROAD BASED TAX CUTS. If you get less taxes taken out of your paycheck, is that a positive or negative for you, genius?

        1. a different chris

          It depends on what happens to everybody else. All money is relative. If I get “to keep more” as the idiots like to label it, but everybody else gets to “keep even more” and that extra is “paid for” disproportionately out of the maintenance of my little chunk of society (roads, police, healthcare accessibility), then I’ve lost by purportedly winning.

          So not sure “unambiguous” is really true.

          >The payroll tax holiday under Obama was a huge boost for people

          Agreed. And it was exactly the opposite of “broad based”.

          1. jerry

            Yes, the more lower income people are helped by the tax cuts, the greater the benefit for the economy (as they have the highest propensity to spend).

            Taxes are not required for spending, spending comes first. Learn MMT.

            1. Yves Smith Post author

              My God, do you believe this stuff?

              1. Many lower income people do not pay income taxes.

              2. To the extent they do, they don’t pay much

              3. Therefore a tax cut strategy overwhelmingly benefits the rich and upper middle income groups who pay the most in taxes.

              4. It has been repeatedly documented that the resulting “trickle down” does not stimulate anywhere as much growth as increasing spending.

              1. jerry

                1 and 2. As a percentage of their income (especially considering FICA), low and middle class most certainly pay more than rich people whose income often includes capital gains/dividends/real estate/etc. which is 15 or 20% or even lower (hence the warren buffett and his assistant story). This is why Warren Mosler has always called for immediate payroll tax holiday to stimulate the economy.
                3 and 4. You are just assuming that a tax cut strategy has to be regressive, when it could be anything we want it to be (including higher tax credits for the poor like EIC).

                1. Yves Smith Post author

                  Even then you are wrong

                  Rich people pay about 18% of their income in Federal income taxes.

                  The bottom quintile pays 4% of its income on Federal taxes.

                  The next quintile paid an average of 10.6%.


                  The bulk of FICA is paid by higher quintiles. And because the poor don’t pay much in taxes because our system still is progressive overall even with a mildly regressive FICA, you aren’t going to get that much net stimulus by cutting taxes on the bottom. It’s going to go to the top three quintiles.

                  In other words, even though lower income groups should have a high propensity to spend, tax cuts won’t drive that much money to them.

                  I agree FICA cuts would be more productive but even now, with people indebted, anyone with student debt or a car loan is going to prioritize that over spending.

                  Moreover, using FICA to deliver tax cuts is like wrecking the foundation to fix plumbing. Yes. it is a very good route to go when you need to deliver stimulus in a hurry, which is why Mosler was a fan of using it during the crisis (and we did have a FICA cut then). But helicopter money is about extreme measures to create inflation, and not counter-cyclical stimulus. Cutting FICA results in more funding stress since the CBO does not believe in MMT and thus justifies cutting Social Security.

                1. Yves Smith Post author

                  No, you were put in moderation based on behaviors that were violation of our site policies. The most valuable asset on this site is my time and I’ve had to waste a ton of it dealing with your lazy and not well thought out comments.

                  On top of that, you engaged in bad faith argumentation. You started by advocating broad based tax cuts. When told that was indeed tantamount to trickle-down economics, you then shifted ground and pretended you had been advocating FICA cuts, when that was false.

                  This is not a chat board and you failed to provide supporting data and clarified comments only when challenged, and even then you had to be challenged repeatedly. This is not up to our standards. Commenting here is a privilege, not a right, and you showed a lack of respect for your fellow commentors and the site admins.

        2. cnchal

          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.

          Peasants don’t have “real and financial” assets. Unlike the central bankster’s toolbox, the peasant’s toolbox consists of quality hand tools and the principle of “the dollar that doesn’t have to be earned is more valuable than the one you do”.

          Bernanke’s broad based tax cut applies to federal taxes and lowering the taxes of a peasant by 5% lets the peasant keep a bit of beer money, while lowering the plutocrat’s taxes by 5% leaves the plutocrat with millions, and unless the plutocrat decides to buy 1,000 Chevys, that money will go to real or financial assets, and for the purchase of corrupt politicians and economists.

          The plutocrats have been on the receiving end of helicopter money for decades, even Bernanke says so, and tell a fairy tail that lowering their taxes even more will bring benefits to the peasants. The peasant have said fuck you, here is a grenade called Trump.

          As to your question, how about another question.

          Would you prefer a tax cut that leaves $100 in your pocket and $10,000,000 in Captain Greed’s pocket?

          1. jerry

            There were no details given by Bernanke, it is a hypothetical. I am saying generally that tax cuts (especially ones that target poor and middle class who have higher propensity to spend) are a huge positive for the economy, as is infrastructure spending or jobs guarantee. To call all tax cuts “soaking the rich” or “trickle-down economics” is ignorant.

            You are grossly over-dramatizing this just to argue a point that isn’t being made instead of considering basic economic math.

            1. Yves Smith Post author

              You are the one who is being disingenuous.

              All tax cut driven stimulus programs HAVE to target primarily upper income groups because lower income groups pay no or little in income taxes to result in any meaningful stimulus. It’s not an accident that the Republicans and not the Democrats are big proponents of tax cuts as an alleged stimulus measure.

              1. weinerdog43

                Wrong again.

                Example: $100 cash card or direct deposit with an expiration date (spend it or it expires) will be used.

                1. Yves Smith Post author

                  1. You’ve changed the topic completely. This is straw manning, big time. We were discussing tax cuts.

                  2. A direct deposit or money on a cash card could be used to pay down debt. There’s no assurance it will lead to new spending.

            2. JTMcPhee

              Just what taxes on the poor, and the working class that includes so many of the poor, and on that blandly undefined middle class, would Jerry want cut, to leave just how much “extra” money in the pockets of the largely “unbanked” (except for various kinds of largely nondischargeable debt), and what might that quantum of money that no doubt is in aggregate maybe in the range of a couple of F-35s be devoted to? And who ends up with it?

              You say broad based tax cuts are the motion on the floor. Real estate? Most don’t have any. Sales tax? What does that revenue stream fund? Personal property tax? Love to hear how those of us whose tax payments often are minuscule, except for the regressive forms, will benefit…

              1. jerry

                FICA would be the most effective target, since lower income people pay the most, and higher income (100k+ or whatever the cutoff is now) pay nothing further into. Beyond that, sure, sales tax. Or, as the name implies and as Bush II did, just write people checks.

                I’m struck by the closed-mindedness in this comment section, often considering this one of the safest and most prominent progressive blogs on the internet. C’mon people!

                1. Yves Smith Post author

                  No, the problem is you have been making repeated, poor quality comments, and have shifted ground in response to legitimate criticism while dishonestly pretending not to have done so, and have been forcing me and others to deal with you. This is not a chat board. Commenting is a privilege, not a right. I personally should not be having to spend as much time as I have addressing your remarks, which for the most part have been lazy hand waves.

        3. Norm

          One should keep in mind that for many households a modest tax decrease will not result in extra spending but simply more money going to debt service, in the hope that they might see the end of the tunnel they’re in sooner rather than later. Then with all the variable rate loans out there, it won’t take long for the banksters to realize that there’s more money for them to steal by increasing rates. So, net gain for many equals zip.

          1. jerry

            Who says it has to be modest? Who would spend their entire tax cut on debt service? You just want to eliminate options instead of listening to possibilities.

              1. jerry

                What rules did I violate? Helicopter money, whether its on government spending or on tax cuts, is mathematically the same thing. Government spending can and often does just as easily end up in the hands of the rich, to the benefit of no one else. It seems like you guys are just hearing the word tax cut and your brain immediately equates it to soaking the rich, you’re missing the bigger picture here.

                1. Yves Smith Post author

                  1. Not reading the post, which made clear the overwhelming majority of people would not spend extra money.

                  2. Dishonest argumentation, specifically, as we discussed above, shifting ground without acknowledging it

                  3. Commenting too frequently and being overly invested in winning an argument rather than getting at the best understanding of the mater.

                  4. Not providing substantiating evidence, as in links, particularly since some of what you asserted as fact was false. Had you bothered providing the level of backup we expect, you would not have forced me to do what should have been your work.

                  I should not have to explain things to you as many times as I have. I explained that tax cuts are not a great mechanism for driving income into the hands of people to get them to spend. Direct spending is far more effective, because among other reasons, it creates jobs which give people much more confidence in their ability to spend than a tax cut, which they know is temporary.

        4. Skip Intro


          There’s your problem right there. Isn’t it about time to whip out your Laffer curve?

      2. reslez

        Everyone who works pays payroll taxes, 15.3% of income with half paid by the employer. That’s not a small chunk for people on the edge.

        1. JTMcPhee

          I don’t think FICA is honestly characterized as a tax;. It is prepayment into the retirement system that was set up to try to reduce the number of (yes, mostly white) people in horrible indigency When they got t the end of their working days, and to put a thiin pad under the lives and bodies of disabled persons. And maybe you might go on and on about the evils of SS and how it is robbing present payers to fund those “rich old bastard Boomers who don’t have the decency to Just Die.” I would say it is the target of fokking looters, and has been for decades, and it serves its purpose as thought up originally for me and a lot of people I know, including young disabled persons who some would say ought to die too, because they are just “useless eaters.” 15.3 percent of one’s WAGES, except what goes on a W-2 in excess of $120,000 — into a savings account that so far is not lootable by the fokkers who run the 401ks and mutual funds and the rest of the Great Casino. So yeah, give people paid far less than they ought to be by the grasping C-Suite-ers a “cut” in that FICA (and Medicare, while you’re at it) and gee, is it not the case that the Second Law of Neoliberalism applies, cutting the throats of all those people “living on the edge”? And gee, how, and how quickly, will the Ruling Business Model immediately adjust prices and other levers to steal that “tranche”?

  9. Altandmain

    First of all, if most people won’t spend it, then of course prices won’t go up by that much. About three quarters of the people asked are going to save it or use it to reduce their debt.

    That leaves just a quarter to spend. So the stimulus effect in that regard would be modest.

    Equally interesting is that concerns about inflation are highest in Poland and Romania, where the smallest percentage of people will spend the money. There seems to be an inverse correlation there of sorts. Czech and the Netherlands too follow that trend.

    I still support the policy, but for very different reasons. People who are saving are probably doing so for an unexpected emergency. While the majority of the nations surveyed have universal healthcare, there are still emergencies that require money. Everyone has one.

    Having some extra money in an emergency can be really, really important. The other is that it can prevent debt, which lowers one’s credit rating, causes interest payments, etc. Life throws things at you and unfortunately they require money.

    I’d love to get this done in the Anglo world outside of the UK. US, Australia, New Zealand, and here in Canada. Perhaps a state by state breakdown (or province here in Canada).

  10. Synoia

    How exactly does the Central Bank put money into the “hands of” evrybody?

    Direct deposit? Yes it make money available to Banks, but to people?

    Why in the US would that money not be taxable?

    Proving yet again, that Central Wankers DO NOT understand the difference between monetary policy and fiscal polocy.

    ps I hate typing on a cellphone, I make too many misyakez.

    1. cnchal

      It was a thought experiment, not reality.

      Unless you are part of the elite. Then you have been on the receiving end of helicopter money for decades.

    2. lyman alpha blob

      IIRC George Bush gave out some back in the early Aughts – everybody got a government check for the same amount nationwide. I worked in a bank at the time and remember one middle aged African American guy coming in to deposit his check from the US Treasury sardonically quipping ‘Thank you for our Great White Father’ as he handed it to me.

  11. Michael

    So money used to pay down debt isn’t spending? ( I went into debt buying a fridge last year)
    Investing isn’t spending? ( I bought dividend paying stock to earn future income)

    Only buying consumer goods or services today is spending?

    Seems like the goal of the survey was to measure the support for an idea that favors business over people.
    No surprise the answer is it sucks.

    1. Mike

      Debt payments don’t generate new economic activity. I guess your refrigerator is still generating checks for an accounts receivable office to process, but that doesn’t do much to kickstart an economy.

      1. Michael

        Sure they do. Some gets paid to put the 0’s and 1’s in the right boxes. No debt no work. I f everyone paid cash, whole loan depts would dry up and blow away. The fact that economists count the whole purchase at the start of the loan process isn’t an accurate reflection of reality.

    2. Mel

      Paying-down-debt money already got counted as spending, the day you borrowed it and spent it. You shouldn’t count it twice.

      1. Code Name D

        Actualy, Prof Keen argues that paying down your debt takes money out of the economey, In the neo-liberal world, he economey expands when people barrow more, and contracts when they pay it down or default.

        Helicopter money to pay down debts would expand the ecoenomey at all, but would lead to a smaller privet debt ballance sheet.

  12. a different chris

    You guys clearly are not understanding how this works:

    1) Give money to everybody, ideally with some proportionality to their taxes (rich win! – but note, you need to give some to the Mitt’s 47%)
    2) Ignore inflation in real goods because cellphones are cheaper (rich win!)
    3) Said inflation will force the bottom 75% (Mitt’s 47%, he could never do math ) to use the “helicopter money” to – barely – keep the roof over their heads and some slop on the table for a little while longer. Since both the mortgage and the food bill come from corporations whose stock is mostly held by the… well, you get it: rich win!

    Monetarism is awesome.

  13. kk

    I have never understood why a politician does not come forward and say, ‘vote for me and I will cancel all student debt’. The state could pay it off over the next 50 years and no one would care. About the cost of a smallish war I imagine.

    1. backwardsevolution

      kk – if you want to cancel all student debt, then how about car debt, mortgage debt, credit card debt?

      How about you just pay back the debt you took on? Now, that’s a novel idea.

      IOW, don’t take on debt that you can’t pay back. It’s not rocket science.

      1. JTMcPhee

        And the Rectitudinal Puritan speaks!

        Let’s see, wars and war materiel and gifts of huge amounts of “money” to banks from central banks are all if I understand correctly funded by DEBT, and “the government” that benefits rich people (like you, maybe?) sets up and “guarantees” student loan programs that are rife with the worst kinds of slick selling and corruption and kickbacks, and stuff like that. And you want to ride that high horse and tell the people you look down on that they should “just pay back the debt they took on?” Like people whose houses were simply stolen by foreclosure fraud. never remedied? Like the debt from the abuses and horrors of the whole med-pharm-hospital scam that so outrageously is called “health care”? And student loans that are virtually not dischargeable in bankruptcy, unlike the scams that PE pricks like Romney et al. pull all the time, to loot the economy and then get a, wait for it, DISCHARGE of debt they took on and escape paying back and put the money in their vast pockets to put some of it in the pockets of legislators who spout crap like your condescending toot “just pay it back”?

        And maybe you wonder why people, ordinary people, are building up a head of very angry steam…

      2. UserFriendly

        Yeah, that makes sense. I must have been some stupid 18 year old for thinking that going to college in 2003 was a good Idea. Clearly, I should have known all about business cycles and the rampant fraud going on at Wall Street so I could have been an informed consumer and not bothered throwing $120k to a state school for an engineering degree that would be completely useless for 3 years. Stupid me, I should have known better. Maybe when I pay off my ballooned debt in 2060 I’ll have learned my lesson, Of course I’ll never be able to afford kids so it’s kind of pointless.

        1. flora

          well, see, in 2003 you were thinking long-term, whereas neoliberals only think short-term. The problem for neoliberals in thinking short-term is they kill the goose that lays the goldern egg. The problem for you thinking long-term is that neoliberals were in the driver’s seat when you went to college. The neoliberals are still in the driver’s seat. So, no immediate payback for them results in no future for you. The neoliberals are not “future oriented”. (There’s an understatement!)

      3. a different chris

        Of course why didn’t we all think of that! The future is so predictable! You knew you would have a couple of kids and one of them would come down with a terrifying cancer in their teens and so you needed to become wealthy so you did!*

        *Note: despite the jocularity, this is the exact situation – except for the wealthy part – of an engineer a few cubes down from me. Somebody needs to face death over this and it isn’t him or his child.

      4. aab

        HAHAHAHAHAHA. That’s so cute. Rich people dump their debt consequence-free all the time. All they have to do is organize their assets so it looks like business debt, or temporarily hide assets in tax havens before bringing it back.

        I would be in favor of a 100% debt jubilee for all citizens. Why not? So many people have had their livelihoods and assets stolen by the financial sector. Let the banks finally feel a bit of pain. And much of that debt is held by the government in one form or another, so it literally doesn’t matter. Various governmental agencies have LOST trillions of dollars. Just misplaced it, apparently. So even if you don’t accept MMT as being valid, there’s clearly plenty of money sloshing around in the system. Let citizens have a taste.

  14. Aaron

    The question was put to people as if the money would end after a year, so obviously, people are going to be much more cautious than if helicopter money was introduced as a serious, long lasting program.

    1. backwardsevolution

      Aaron – helicopter money should never be a long-lasting program, let alone be done at all.

      Stop the central banks from purposely “creating” the inflation they are constantly creating. If you don’t have inflation (and we all know it’s MUCH higher than what the government says it is) or rapidly rising prices, then you don’t need helicopter money.

      Helicopter money would never be brought in to help YOU, anyways. If it was ever brought in, it would always be because you can’t pay your debts back to the precious bankers. It’s a bail-out for the bankers, essentially.

      The problem is the inflation you have allowed your politicians and central bankers to get away with year after year after year. If you didn’t have inflation (or very little), prices would not rise, and you wouldn’t need a raise or a government helicopter drop.

      Prevent your government from creating inflation.

  15. Karen

    Like other commenters here, I am skeptical that consumers really WOULD save as much of the “helicopter money” as they said they would. For two reasons: one, some will succumb to temptations and two, many will experience unexpected expenses (e.g. car repairs, home repairs, and in the USA, medical expenses).

    Of course, FAR, FAR better than “helicopter money” after the fact would have been cracking down on the banks’ criminal behavior during the boom, and making it illegal to base corporate incentive compensation on paper “profits.”

    1. Yves Smith Post author

      The reason I beg to differ is that the “right” answer from an economics perspective is they should spend, and respondents to questionnaires are very sensitive to subtle cues (even tone of voice) of the party administering the survey.

      Given the economic stress most people are under today, and particularly in Europe, where the official employment rate is pretty close to 10%, it’s not hard to imagine that most people would save most of a windfall and spend only a little bit to treat themselves.

      1. Kurt Sperry

        This assumes that the interviewer shares the “economics perspective”. Unless economists are actually conducting the interview that’s unlikely to be the case. Sadly, the polling methodologies aren’t provided.

      2. animalogic

        I am not against “helicopter money” per se. However, we all recognise that it’s (or should be) a kind of emergency device. The “Rudd money” was (part of a wider)response to the GFC. I have only instinct to support me, but I believe a bout of helicopter money would be spent to the degree that it would be a “real” stimulus (assuming it’s adequate in the first place)
        Outside of a response to an acute economic situation, helicopter money should be unnecessary. Counter-cyclical fiscal policy, plus removing such OBVIOUS burdens on BOTH business AND consumers as the introduction of universal health care, re-regulation of the FIRE sector, and mandatory international environmental & labour standards would hopefully negate the need to consider “helicopter money”….Yes, I know, DREAM ON….

  16. Tim

    We’ll then, the solution has become obvious. My corporation just ditched there employee cash reward system for…wait..for..it…a points based system that you can use to select GIFT CARDS!!!

    Drop a pre-loaded Visa gift card in every mail box. They have to spend the check into the economy or throw it away.

    Some will be smart enough to then save other money they would have spent but didn’t because of the card, but many will just look at how much is in their account and spend it on other things.

    If they REALLY want to prove we are Facist, then they won’t just be open visa cards they will be prepaid gift cards to certain large corporations that have “paid their dues” to congress.

  17. Katharine

    I don’t claim deep understanding here, but I question the apparent assumption that only direct spending would be economically beneficial. Even if people used most of their windfall to pay down debt, surely that would be apt to have a positive effect on their subsequent spending, as what did not go to interest could be used for some material good.

    1. JTMcPhee

      …and of course, a healthy political economy, one that can be sustained and is stable, is all dependent on “going to the mall” or Amazon Prime…

      1. Katharine

        Until we find another way to ensure that people have steady access to the things they need, an economy that produces more jobs is better than one that produces fewer. If you object to that premise, surely your comment applies to the post as a whole and not just to my comment.

  18. BobW

    It’s not helicopter money, but I added a $1,000 work bonus into a 401(k) retirement account, and used the money it freed up to pay off the last of a loan that was at 13% interest. My situation is that I have a good job now, was homeless and unemployed four years ago, have little in the retirement account and am a “work till you drop” 65 year old. All of this leads me to prefer saving to spending. Memories of waking in a tent in the cold wondering if I had enough for a 55 cent senior coffee at Burger King.

    1. a different chris

      Could you explain that again? How did putting money into (something) simultaneously “free up” money to spend elsewhere?

      PS: glad your situation has improved

      1. BobW

        Chris, it was unexpected bonus money for the company’s performance the previous year. That’s why I thought it was like helicopter money. I had been putting as much as possible into the retirement account while getting slightly ahead on the loan payments. The bonus allowed me to completely pay off the loan.

      2. cwaltz

        Dave Ramsey and other debt programs talk about this all the time. If I pay off a loan that has a monthly payment of $250, I then “free up” that $250 a month to do something else(they generally encourage you to roll that “freed up” money into another debt to reduce the principle faster and free up more money. It’s called debt snowballing.)

  19. Norb

    The only solution is to increase wages and provide a job guarantee for all. On top of that, money or services must be provided for those with disabilities. Baring that, the endless exploitation of the poorer classes will continue until actual revolution or complete social breakdown. A society of debt slaves is not very appealing.

    As for helicopter money, I thought money was fungible. The most economically responsible action someone could take is to reduce their debt level and take advantage of that breathing space to learn how to live within their means. Having citizens secure in their communities free of economic hardship is not the goal though. It is to secure the power of the 1%. It seems working stiffs will be given just enough credits, as long as they spend them in such a manner as to sustain those in power.

    1. a different chris

      >learn how to live within their means.

      Agreed but “in my day” people* could flip burgers and, maybe taking an extra year, pay for college. Not now, though. So if “living within their means” means never going to college and having high odds of permanently living on a lower income track**, good luck selling that.

      *not me! I borrowed about 1/2 of it but that only worked out to payments of <50/month, back when that was… actually it was trivial even back then.

      **to be fair, it’s now looking like college isn’t helping either but bear with me here

      1. Norb

        That is the problem- selling. It is easier for the 1% to make working people believe they are not being totally screwed by the system. It is really painful to acknowledge that you have been swindled. Lets all pretend we live in a Great society. America is the best!

        The problem with going into debt to start your life is that there is no room for failure or hardship. Any setback will pretty much end your life. This is why poverty is never solved. A society has to actively prevent it by providing resources or constant access to the necessities of life to offset the hardship brought about by the randomness of the universe. Luck plays a huge roll in deciding who succeeds in life and who doesn’t. I have no doubt whatsoever that this economic justice could be achieved. It would take compassion and solidarity thought and the greed faction has been winning the ideology war so far.

        A debt centered on a common obligation to achieve a certain productive social goal is a good an nobel thing. A debt undertaken to enslave another is something totally different. Both are debts, but one is morally reprehensible and the other is not. When you live in an amoral society, only trouble and conflict abounds.

  20. nothing but the truth

    is lack of inflation the problem that we are trying to solve on this planet? With a money system that is ex-nihilo, does inflation even mean anything except the rate at which land screw everyone else?

    An Economist to me seem like a chess player who is trying to play with himself and takes the results of those games as meaning something fundamental. Playing chess with oneself can never give an interesting result. It is just a preconceived/sponsored result that is being justified to an unsuspecting public.

  21. rd

    Social Security, food stamps, Medicare are all examples of “helicopter money” that is immediately recirculated back into the economy. Tax cuts for the wealthy is an example of “helicopter money” that is not recirculated in the economy except as an asset price booster. The more money is available to people below median household income, the more likely it is to be recirculated quickly.

    Things like increased infrastructure spending gets recirculated as income pretty quickly. It can also take pressure off of local municipalities which in turn can restrain property and sales taxes which leaves more disposable income in people’s pockets to spend or pay down debt.

    1. animalogic

      “Things like increased infrastructure spending gets recirculated as income pretty quickly.”
      I largely agree with what you say, however…there are dangers.
      The danger is as much political as economic: the proverbial “bridge to no where”.
      In Australia, the Labour Party, “Rudd stimulus” was aimed to pump money into the economy as quickly as possible to counter the GFC drag. As such, possibly some of the money was spent with inadequate consideration. And, although it was arguably successful, the scheme became a mill stone around the government’s neck.
      Why ? Because the Opposition was able to argue that “ALL” of the spending was wasteful, irresponsible. (Some money was spent on building school halls, some on subsidizing home (roof) insulation. This became, in public perception, at least, gross irresponsibility.. Why ? Because, the spending which in part prevented Australia slipping into recession, was therefore unnecessary (ie irresponsible) because there was NO recession. Money wasted !! The GFC simply & conveniently disappears out of the narrative.

  22. Chris

    I suspect that there’s a basic problem with the methodology used to conduct the survey. Although I can’t confirm it, I’m guessing that ING’s survey is internet based, and only probes our side of the ‘digital divide’. The immiserated 20% at the bottom of the heap don’t get to respond.

    If helicopter money was delivered by doubling all welfare payments (and replacing food stamps with cash) most of it would be spent in a week. Every week. The national economy would pick up through the magic of ‘trickle up economics’.

    1. oho

      ‘most of it would be spent in a week. Every week.’

      it would mostly go to the shareholders of WMT, KHC, YUM, KR, PG, etc.

      and once their checking accounts, velocity of money >>> near zero.

      1. Chris

        Well, oho, some would go to the shareholders. But first it would pay the employees and the suppliers. And maybe there’d be some tax to pay.

        Some of it may also be used to pay down debt…

    2. Yves Smith Post author

      An internet based survey would skew young in terms of respondents. While income clearly is a factor, the surveys I’ve seen in the US of where people don’t have much/any Internet access shows it correlates strongly with urban v. rural.

  23. Adar

    When My spouses’s “tax relief for america’s workers” check arrived from W. Bush, it was for $1.34. We never deposited it, just kept it for laughs. We live frugally and have no outstanding debts, so the problem with a helicopter windfall is, if you aren’t going to spend it, what to do with it? Time was, not too long ago, that savings accounts earned up to 8% interest. Now, outside of high- risk, high-volume stock market dealings, people with less than 500K in savings have no where to go. Savings accounts? Certificates? Zip interest. Might as well keep it under the proverbial mattress. Perhaps the folks in Italy who said they’d spend it were being sensible…

  24. John Wright

    Actually real helicopter money was advocated by humorist Art Hoppe (San Francisco Chronicle) during the Vietnam War.

    He suggested, if the allocated cost to kill a Viet Cong soldier was calculated to be $50000 USD ( $346771 in today’s dollars) then what the USA should do is to bundle up $50000 in one dollar bills and bomb the Vietnamese countryside with the 50K packages.

    His theory was if a VietCong were hit, he’d be killed instantly, and if not, he’d pick up the bundle of dollars and be converted to capitalism, also instantly.

    Hoppe also said: “Old men declare war because they have failed to solve complex political and economic problems.”

    A link to his obit in the Guardian: https://www.theguardian.com/news/2000/feb/10/guardianobituaries4

  25. Foy

    Here’s a real life situation…these results come from a telephone survey of 1200 Australian households where during the 2008/2009 GFC the government paid approx $1000 in helicopter money to pensioners and families. Some households received up to $3,700 depending on what they qualified for. Some were paid in the nature of a direct payment, some as a tax benefit. 70% of those surveyed said they received a payment. Here is how they said they spent it…

    Spent it [on things other than bills or other debts] 39.8%
    Used it to pay bills [utilities (phone, electricity etc), medical, other services] 30.2%
    Credit cards 1.5%
    Mortgage 2.9%
    Personal/short-term loans [e.g. car payment] 0.3%
    Saved it 18.7%
    Invested it 4.9%
    Don’t know / Not sure 1.2%
    Refused 0.4%
    Total 100.0%
    Sample size 817

    Here is the study where these results came from:


    Andrew Leigh is a Professor of Economics who is now a member of the Australian parliament for the Labour party. A professor of economics and now a politician…it would seem the guy is trying real hard not to be popular!

  26. Gaylord

    Make grants to the plebes, offer 50% return in a year if they invest in govt infrastructure projects. Way to rebuild the Commons and condition them for saving in the future, for continued benefit of all.

  27. Kat

    By the way, going cash-less is rearing its head again! This time by the crazies at Positive Money. Still dont understand why digital cash is better than physical cash unless you are trying to prop up financial sector businesses. http://positivemoney.org/2016/02/how-would-you-be-affected-if-the-bank-of-england-starts-issuing-digital-cash/

    Also I think helicopter money is a distraction to draw attention away from the fact that many of the loans, that are going to be paid off with helicopter money, were dubious and liable to be challenged in the courts like NINJA loans. “Just provide free money to people so they dont complain about being cheated by the finance industry.” Plus this may also help repair balance sheets without going through the political problem of justifying bailouts.

  28. amousie

    So a certain portion of the population is already getting helicopter money via QE and considerably more than 200 euros per month since it’s a smaller number of people involved. My questions are:

    1. What are the QE benefit people currently doing with their extra money?
    2. What happens if you don’t have a bank account?
    3. Will it be like some of the previous US helicopter drops that Bush did, in that if you didn’t have enough money to file taxes, you didn’t necessarily get the windfall?
    4. Since that QE small population has already been getting regular infusions, will they be included in the next “helicopter money” to everyone “else” drop?

    ETA: How might helicopter money play into the cashless society end-game and the ability of governments to pull the money directly back out of accounts with little to no warning?

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