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I don't understand what you are saying here if point 1 is that it enables helicopter money, how is the conclusion in point 2 that it enables sound monetary pol

by anm89 5y ago

I don't understand what you are saying here if point 1 is that it enables helicopter money, how is the conclusion in point 2 that it enables sound monetary policy?

nabla9 5y ago
Sound monetary policy according to Fed mandate and goals is low unemployment rate and average inflation rate 2 percent over medium length period. Many argue that helicopter money is better alternative to quantitative easing (buying bonds). Just give money to the people. Buying bonds is ineffective because bond holders don't consume. The velocity of money just drops and asset prices increase. (you may picture helicopter money as trowing more money than is needed, but that's now what the idiom means. It means that the money lands on people, not banks).
- anm89 5y ago
  I dont think the term sound is used by many to imply that the fed is simply following its mandate. if so then the fed has been doing "unsound" monetary policy for most of the last 10 years. Sound is generally used specifically in a connotation of not debasing the currency. Also gotta strongly disagree that the concept of helicopter money has no connotation of amount. to each their own I guess.
  - nabla9 5y ago
    > if so then the fed has been doing "unsound" monetary policy for most of the last 10 years. Fed has to work within the tools it has. Especially when government is stuck and fiscal policy is almost never sound or enough. With the tools it has, it has done it right. The problem is that there is zero lower bound.
    - anm89 5y ago
      If you are explicitly defining "sound" policy as following the mandate then their intent or reasoning is irrelevant. According to this logic, they failed to reach 2% inflation for most of the last 10 years and therefore the policy was unsound. As you'd be right to point out, almost nobody defines monetary policy in these terms, but it's your definition. The fed balance sheet is 1/4 the size of the total economy, the over night rate is so low that OMO only works in one direction, it takes more than 1.5 Trillion dollars of reverse repo a night to keep banks in operation, and the Fed is so backed into a corner that they purchased bonds and didn't raise rates (expansionary) in January while inflation was at 7%. Meanwhile former Fed board members, former treasury secretaries, and basically every macro bank analyst in existence is commenting that the Fed has made it's biggest policy error of all time. So sure, keep arguing that they are doing "sound policy" whatever that means. Most people aren't going to buy it.

by anm89 5y ago

I don't understand what you are saying here if point 1 is that it enables helicopter money, how is the conclusion in point 2 that it enables sound monetary policy?

nabla9 5y ago

Sound monetary policy according to Fed mandate and goals is low unemployment rate and average inflation rate 2 percent over medium length period. Many argue that helicopter money is better alternative to quantitative easing (buying bonds). Just give money to the people. Buying bonds is ineffective because bond holders don't consume. The velocity of money just drops and asset prices increase. (you may picture helicopter money as trowing more money than is needed, but that's now what the idiom means. It means that the money lands on people, not banks).

anm89 5y ago
I dont think the term sound is used by many to imply that the fed is simply following its mandate. if so then the fed has been doing "unsound" monetary policy for most of the last 10 years. Sound is generally used specifically in a connotation of not debasing the currency. Also gotta strongly disagree that the concept of helicopter money has no connotation of amount. to each their own I guess.
- nabla9 5y ago
  > if so then the fed has been doing "unsound" monetary policy for most of the last 10 years. Fed has to work within the tools it has. Especially when government is stuck and fiscal policy is almost never sound or enough. With the tools it has, it has done it right. The problem is that there is zero lower bound.
  - anm89 5y ago
    If you are explicitly defining "sound" policy as following the mandate then their intent or reasoning is irrelevant. According to this logic, they failed to reach 2% inflation for most of the last 10 years and therefore the policy was unsound. As you'd be right to point out, almost nobody defines monetary policy in these terms, but it's your definition. The fed balance sheet is 1/4 the size of the total economy, the over night rate is so low that OMO only works in one direction, it takes more than 1.5 Trillion dollars of reverse repo a night to keep banks in operation, and the Fed is so backed into a corner that they purchased bonds and didn't raise rates (expansionary) in January while inflation was at 7%. Meanwhile former Fed board members, former treasury secretaries, and basically every macro bank analyst in existence is commenting that the Fed has made it's biggest policy error of all time. So sure, keep arguing that they are doing "sound policy" whatever that means. Most people aren't going to buy it.