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> Except it stops working when you can't go below 0? Central banks are able to utilize other policies (e.g. helicopter money via TLTROs) to provide economic st

> Except it stops working when you can't go below 0? Central banks are able to utilize other policies (e.g. helicopter money via TLTROs) to provide economic stimulus at this level.

ajross 7y ago
How is helicopter money substantially different from fiscal policy though?
- ikeboy 7y ago
  For one, it doesn't add to the debt.
  - ajross 7y ago
    It does, though. Or neither does, maybe. "Debt" in macroeconomics isn't a zero sum thing. The central bank lifting in money creates inflationary pressure instead of a negative number in the general fund transaction log, so to counteract that the promise is always made via whatever mechanism is chosen ("helicopter money" is a bewildering variety of distinct tricks) to "buy back" the stuff you dropped later on, to prevent the runaway inflation scenario. So in practice, it's no different than spending with concomitant bond issue, which also promises to pay the money back. And is also an inflation pressure if the market decides the promise isn't worth the nominal interest rate.
    - ikeboy 7y ago
      I thought the whole point of helicopter money is because you want inflation and shouldn't be buying it back later.
- nickles 7y ago
  My understanding is that helicopter money expands a central bank’s balance sheet (irreversibly) whereas fiscal policy does not, but the distinction is murky when considering policy like tax rebates.
  - ajross 7y ago
    Well, yeah, so the central bank bears the debt instead of the government general fund. So I guess I repeat the question. I meant "how is it more effective stimulus?". The contention upthread was that we shouldn't use government spending for stimulus when monentary policy works better, to which I replied that monentary policy doesn't work at all in this situation, to which the suggestion comes back "well, just helicopter in money from the central bank as stimulus", which is... not monentary policy. It's just the same thing as spending modulo some accounting.
    - nickles 7y ago
      > The contention upthread was that we shouldn't use government spending for stimulus when monentary policy works better I actually disagreed with this assertion in another comment [0], so I think we're in agreement here. > monentary policy doesn't work at all in this situation This is incorrect, though. A central bank may loan money to banks at a negative rate, with the condition that the loan funds non-financial and household spending (TLTROs) [1]. Such policy can provide stimulus at or below 0% interest rates. > "well, just helicopter in money from the central bank as stimulus", which is... not monentary policy As stated, whether helicopter money is monetary or fiscal policy is murky, but likely depends on its implementation: "In other words, fiscal policy is about managing the net financial assets of the non-government sector relative to the state of the economy, and monetary policy is about managing interest rates (and through it, to the best of its abilities, bank lending and deposit creation) relative to the state of the economy." [2] If, for example, the legislature were to issue a tax rebate to each citizen, it would satisfy Fullwiler's definition of fiscal policy. However, if implemented by directly altering bank lending, as TLTROs attempt to do, it should be considered monetary policy. [0] https://news.ycombinator.com/item?id=20080372 https://news.ycombinator.com/item?id=20080372 [1] https://www.ecb.europa.eu/mopo/implement/omo/tltro/html/index.en.html https://www.ecb.europa.eu/mopo/implement/omo/tltro/html/inde... [2] http://neweconomicperspectives.org/2015/06/what-is-helicopter-money-anyway.html http://neweconomicperspectives.org/2015/06/what-is-helicopte...

> Except it stops working when you can't go below 0? Central banks are able to utilize other policies (e.g. helicopter money via TLTROs) to provide economic stimulus at this level.

ajross 7y ago

How is helicopter money substantially different from fiscal policy though?

ikeboy 7y ago
For one, it doesn't add to the debt.
- ajross 7y ago
  It does, though. Or neither does, maybe. "Debt" in macroeconomics isn't a zero sum thing. The central bank lifting in money creates inflationary pressure instead of a negative number in the general fund transaction log, so to counteract that the promise is always made via whatever mechanism is chosen ("helicopter money" is a bewildering variety of distinct tricks) to "buy back" the stuff you dropped later on, to prevent the runaway inflation scenario. So in practice, it's no different than spending with concomitant bond issue, which also promises to pay the money back. And is also an inflation pressure if the market decides the promise isn't worth the nominal interest rate.
  - ikeboy 7y ago
    I thought the whole point of helicopter money is because you want inflation and shouldn't be buying it back later.
nickles 7y ago
My understanding is that helicopter money expands a central bank’s balance sheet (irreversibly) whereas fiscal policy does not, but the distinction is murky when considering policy like tax rebates.
- ajross 7y ago
  Well, yeah, so the central bank bears the debt instead of the government general fund. So I guess I repeat the question. I meant "how is it more effective stimulus?". The contention upthread was that we shouldn't use government spending for stimulus when monentary policy works better, to which I replied that monentary policy doesn't work at all in this situation, to which the suggestion comes back "well, just helicopter in money from the central bank as stimulus", which is... not monentary policy. It's just the same thing as spending modulo some accounting.
  - nickles 7y ago
    > The contention upthread was that we shouldn't use government spending for stimulus when monentary policy works better I actually disagreed with this assertion in another comment [0], so I think we're in agreement here. > monentary policy doesn't work at all in this situation This is incorrect, though. A central bank may loan money to banks at a negative rate, with the condition that the loan funds non-financial and household spending (TLTROs) [1]. Such policy can provide stimulus at or below 0% interest rates. > "well, just helicopter in money from the central bank as stimulus", which is... not monentary policy As stated, whether helicopter money is monetary or fiscal policy is murky, but likely depends on its implementation: "In other words, fiscal policy is about managing the net financial assets of the non-government sector relative to the state of the economy, and monetary policy is about managing interest rates (and through it, to the best of its abilities, bank lending and deposit creation) relative to the state of the economy." [2] If, for example, the legislature were to issue a tax rebate to each citizen, it would satisfy Fullwiler's definition of fiscal policy. However, if implemented by directly altering bank lending, as TLTROs attempt to do, it should be considered monetary policy. [0] https://news.ycombinator.com/item?id=20080372 https://news.ycombinator.com/item?id=20080372 [1] https://www.ecb.europa.eu/mopo/implement/omo/tltro/html/index.en.html https://www.ecb.europa.eu/mopo/implement/omo/tltro/html/inde... [2] http://neweconomicperspectives.org/2015/06/what-is-helicopter-money-anyway.html http://neweconomicperspectives.org/2015/06/what-is-helicopte...