The mere mention of helicopter money has intoxicated global stock markets, which have soared on the rumor of Japanese helicopter money. But as I explained in Why Helicopter Money Won’t Push Stocks Higher, central banks funding fiscal spending (i.e. helicopter money) will only have a weak and entirely indirect effect on profits or stock market valuations.
The problem with helicopter money is that it cannot fix what’s broken in the economy–and even worse, it perpetuates every inefficient, corrupt, bloated and unsustainable system in the status quo. As I explain in my book Why Our Status Quo Failed and Is Beyond Reform, the problem isn’t lack of fiscal spending or stimulus; the problem is the primary systems of the status quo have failed and cannot be fixed with central bank easy money.
In effect, helicopter money feeds the perverse incentives that have crippled our economy and society. Rather than be forced to choose priorities and rid centralized systems of wasteful corruption, bloat and graft that siphon off wealth and destroy productivity, helicopter money enables the continuation of all the inefficient, corrupt, bloated and unsustainable systems that make up the status quo.
No sacrifices are required by helicopter money: unlimited sums of freshly created money will be used to fund the same broken systems that have generated extremes of debt and wealth/income inequality.
The list of what won’t be fixed by helicopter money is long:
— The demographic time-bomb in pension plans, Medicare etc.: not fixed, just papered over.
— The higher education cartel’s out-of-control spending spree: not fixed, just papered over.
— The healthcare/sickcare cartel’s out-of-control spending spree: not fixed, just papered over.
— America’s declining health and runaway epidemics of “legal” drug addiction and metabolic syndrome diseases (diabesity): ignored, untouched.
— — The defense-industry cartel’s out-of-control spending spree: not fixed, just papered over.
I could go on and on, but you get the picture: funding broken, bloated, failed systems only perpetuates the rot at the heart of the nation’s economy, society and culture.
Funding Medicare’s immense fraud, needless tests, etc. won’t fix what’s broken.
Funding the failed F-35 fighter aircraft program won’t make the F-35 a better plane or a better deal for taxpayers. It’s still a gargantuan failure, regardless of how much “free money” central banks create to fund existing bloat/waste/fraud.
The entire status quo desperately needs a re-set, but helicopter money insures there’s no pressure for a re-set. Whatever the lobbyists, grifters, political favorites, quasi-monopolies, bureaucratic fiefdoms and cartels want, they’ll get, courtesy of central bank-created helicopter money.
What helicopter money does is destroy the discipline imposed by living within our means, and it obfuscates the crushing opportunity costs of maintaining a failed status quo that benefits the few at the expense of the many.
What proponents of helicopter money cannot evade is the S-curve: simply creating more money and “fiscal stimulus” without generating the higher productivity that creates more wealth is the equivalent of overdosing on crack cocaine and actually believing you have god-like powers to evade consequences.
Creating “free money” to support bloated bureaucracies and corrupt cartels only makes the underlying problems worse. We can’t solve problems with “free money;” solving problems requires realistic assessments, lifting the burden of dead weight imposed on a stagnating economy by bureaucratic bloat, institutionalized fraud, profiteering quasi-monopolies, etc., and actually fixing what’s broken.
I am in favor of real solutions, which is why I wrote A Radically Beneficial World.