HELICOPTER MONEY - CHILL PILL POST COVID-19

HELICOPTER MONEY - CHILL PILL POST COVID-19

  … Vijay Rustogi

During the current “Stay Home”, one of the routines which I follow is to talk to my friends on

the phone. Today I talked to Ramesh. He is my best friend and I have known him for a long

time. He is a qualified Chartered Accountant, Cost & Management Accountant and Company

Secretary. He has worked in India and abroad and is currently settled in Bangalore.

We were having our casual conversation, I asked him about his well-being and told him  - 

“Helicopter Money is the solution post COVID-19 for Indian Economy.”

Nothing sounds better than the sound of Money.  

He exclaimed - 

“What? Helicopter Money? You mean that money will be dropped from the Helicopter.

Are you joking?” 

Suddenly a distant voice of- Suresh, grandson of Ramesh is heard -

“Dada, please put the phone on speaker. I also want to hear about Helicopter.

I love Helicopter.” 

Ramesh smiled and patted Suresh.  He has put me on speaker.

I said - 

“Yes Ramesh, something akin to dropping off money from Helicopter. You know that in

India, the Government follows very strict fiscal discipline. In layman terms, it is a

balance between the receipt and payment. If the payment exceeds the receipt, the

difference is called fiscal deficit.” 

Ramesh interrupted -

“I know that … but Helicopter money?”. 

I told him to listen patiently - 

“COVID-19 lockdown will have a devastating impact on Indian Economy.  The moot

question is - shall we continue to keep the fiscal deficit within the so-called prudent limit.

The people of our country are going to be worst hit due to the closure of several business

enterprises, recession in various lifestyle industries, pay cuts and loss of employment in

both organized as well as unorganized sectors.”   

Ramesh got again impatient and said -

“But … Helicopter …?” 

To which I replied -

“Yes yes, I am telling you. By throwing off prudence of fiscal deficit if the Government

increases the monetary supply in the economy - such a phenomenon is called Helicopter

Money. The COVID-19 impact has to be melted down and the heat for melting will be

provided by the Helicopter Money. Great problem will need innovative solutions.”

Ramesh suddenly got interested and started probing - 

“Have you lost your mind?? From where did you get this crazy idea?”  

“Haha…”, 

I laughed. -

“Nothing new. Infact the name - Helicopter Money - was first coined in 1968 by Milton

Friedman.” 

Suresh suddenly jumped - 

“Yes. Friedman is an American Economist and has also won a Nobel Prize”

My imaginations started taking wings. I continued … 

“Post COVID-19, when people and businesses will have limited money, there will be a

liquidity crunch. No demand will lead to businesses tumbling. Suddenly, after that the

Government will announce on June 6th - Helicopters will fly to each city and village

dropping the currency.”

Suresh said -   in the context of current social distancing -

“Hmmm Vijay, seek an appointment with the Psychiatric via video” - 

I said -

“N..n..no, in fact I mean the money will be transferred by the Government directly to

the account of beneficiaries for the purpose of increasing the liquidity in the economy

and thus increasing the demand in an attempt to reverse the recession and save

business and employment. This may have many variations like reduction in taxes,

loan at very subsidised rates, Government creating assets by transferring money to

citizens. The crux is, to increase the money supply in the market from thin air.”

 Ramesh is now intensely involved and wishes to probe it further very seriously - 

“But whether this has been experimented anywhere in the world?”

To which, I said authoritatively -

“Japan when faced with stagnant growth has implemented the concept of Helicopter

money in 2016. They have created assets by transferring money to citizens/business.”

“Similarly, very recently when China had lower demands after the US China trade conflict,

toyed with the idea of Helicopter money which has created a bubble in their economy.”

I continued…

“Many people believe that whenever the US needs the money they just print it. In fact

Ben Bernanke, another American Economist, has supported the idea of Helicopter money

in 2002 during American recession.”

“TLTROs (targeted longer-term refinancing operations) of Europe is also a kind of

Helicopter Money”, 

Though I am not an economist but as a layman, the idea looked good and practical.  I am sure

with proper elaboration, balancing and precautions this is going to be the answer to put the

Indian Economy back on rails and will pave the way for moving to much higher pedestal in the

World.

Suresh laughingly said -

“What a Great thought from Great Vijay, I am waiting for Helicopter Money shortly.”   

*****