Helicopter Money Explained
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Helicopter Money Explained

December 2, 2019


Hello I’m Callen young and I’m Steve Scranton today’s video discusses the topic of helicopter money what the term means, how it would work, and why it’s being discussed. Our goal is to help you understand another financial term that has surfaced and may be causing confusion over what it really means. Steve when someone hears the term helicopter money they’d probably get the image of the Federal Reserve dumping money out of helicopters. That’s interesting, but what is a real meaning of helicopter money? It is an interesting concept. The term helicopter money came about because it represents the concept of the Federal Reserve creating free money and giving it directly to individuals and businesses. Currently the Federal Reserve provides monetary stimulus by injecting reserves into the financial system with the goal financial institutions would lend us money out to businesses and the ultimate goal of creating spending. It appears that existing monetary policy has not worked very effectively in this economic recovery because financial institutions still have large cash balances in the federal reserve accounts and spending has remained muted by historical standards. That is true. As a result the idea has been thrown out that the Federal Reserve should simply create cash deposited directly into individuals and businesses accounts with the belief that the money would be spent and help stimulate the economy. Seriously? You’re saying that the concept is for the Federal Reserve basically give free money to u.s. citizens and businesses? Kind of hard to believe right? Yes that is the concept. Now you can see where the term helicopter money came from. It is the financial equivalent of the Federal Reserve dropping cash from a helicopter. Unfortunately, that may sound like a great concept, but as a fixed-income securities analyst, you know that it’s not that simple. Right, the Federal Reserve conducts their monetary policy by buying or selling US government securities. If they want to stimulate the economy their authority to buy US government securities and credit the reserve accounts of member financial institutions. That’s what happened during their quantitative easing operations. The Federal Reserve does not have the mechanism to deposit money directly into consumer business accounts and it’s questionable if they have the authority to simply print money. I think the more important point is that a mechanism already exist if the U.S. truly wants to give free money to individuals and businesses. Congress has the authority to pass legislation that would authorize the U.S. treasurer to issue checks or electronic deposits to individuals. This occurred during the last recession when congress authorized the US Treasury to send checks to qualifying individuals. The problem is that this would balloon the deficit. The reason that proponents suggest helicopter money originating from the Federal Reserve is because creation of money by the Federal Reserve does not increase the deficit. As mentioned earlier how the federal reserve and get this money to individuals and businesses is not clear at all. And don’t forget that giving free money is not actually free. Otherwise all countries would be doing this. All else being equal giving free money to individuals and businesses via the Federal Reserve printing money would ultimately lead to higher inflation. Giving free money via Congress passing legislation would increase our deficit. Either of those scenarios would potentially be bad for fixed income investors, consumers, and businesses. Fixed income investors would demand a higher yield for bonds if they believe that inflation or debt problems would result and this would cause bond prices to fall. Higher bond yields would then drive borrowing costs up for individuals and businesses with the potential unintended consequence that they cut back on spending. There are also two other risk to consider. First consumers might not spend the money, simply put into savings. As we saw with the temporary tax cut that occurred during the recession not all of that money was actually spent. Second this is something that has never been tried and it would be a giant economic laboratory experiment with actual results unknown. We would be testing an economic theory in a real world economy. I would simply remind everybody that the age-old adage still applies. There is no free lunch. This has been a brief discussion on helicopter money. If you have more questions about the potential impact to your financial well-being contact a relationship manager with numbers listed on the next slide. On behalf of Callen and me, thank you for taking the time to watch this video.

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  1. You said it can cause inflation and then that this is bad for FI investors, consumers and businesses…. why? The Fed has been trying to increase nflation. I don't see how its bad for businesses or anyone with some leverage/debt

  2. Good coverage of all of the negative things that happen when government and citizens believe that they can create free money.

  3. YANG HAS A BETTER PIPELINE of Helicopter Money," and also includes Single Payer Medicare for All.

    Warren's and Sanders' Wealth Taxes are Unworkable /1/ and Fake, Unlawful /2/ in promising $275 B to $435 billion a year.

    In contrast, Yang's VAT to UBI Pipeline PROGRESSIVELY unlocks the wealth trapped by the 3%, transferring $800 billion a year to fuel liquidity for ordinary people.

    Our nation's wealth is locked in a liquidity trap by our top 3% wealthy who enjoy sitting on their excess, being a dead weight anchor choking our money supply; while our bottom half of earners have negative net worth, are walled off from money, and have to hustle for dimes in despair and bitterness.

    Our huge pool of limited income 172 million excess labor supply (94 million jobless /3/, and 78 million underpaid and underemployed /4/, out of 254 million working age adults), anchors our low demand-pull; which is why inflation is so low; and why low interest can't stimulate suppliers to push-grow our economy.

    Our wealth disparity means, the top 5% who controls 67% of America's wealth, sit on their excess cash, stifling liquidity, while the bottom 50% with negative net worth stagnate in the backwaters of our economy.

    Yang's 10% VAT will HUGELY move $800 billion a year of wealth transfer via UBI from the top 3% transferring liquidity to 94% of Americans to grow our economy.

    Yang's VAT-UBI Pipeline operates as:

    A PROGRESSIVE net UBI benefit,

    AUTOMATICALLY tapering down, and

    reverses into an increasingly higher net VAT cost,

    on higher earners and the wealthy who spend more.

    ONLY those spending over $120K a year (THE TOP 3%) will pay more in VAT than they get in the $12K UBI-Freedom Dividend, and only they are the Net-Contributors into the UBI.

    o Here, the VAT paid,

    – Is NOT used up by the government in its operations.

    – Is an INVESTMENT in the citizens and the future of our society.

    – Is IMMEDIATELY RETURNED by UBI to cash flow.

    YANG'S "UBI HELICOPTER MONEY" goes out far and wide:

    Yang's UBI of $1,000 a month is a Shareholder Right of Citizenship for each one over 18, and is Inflation adjusted.

    $768,000 is what an 18 year old man gets ($12K x +64 years of 82 year life expectancy).

    $840,000 is what an 18 year old woman gets ($12K x +70 years of 88 years life expectancy).

    Yang's UBI is stacked on top of SS retirement income, VDI, and SSDI (but not SSI).

    Yang's UBI will be available to 254 million Americans over 18.

    • Over 100 M, 1 out of 3 Americans live in "near poverty."

    • Over 76 M, 30% of working age Americans did not pay any federal income tax, and no federal tax return need be filed if your Gross Income is under $12,000.

    • Over 43 M, 13.5% of Americans live below the poverty line, of $12,490.

    Automation will displace 30% to 50% of our jobs by 2025 to 2030, dislocating 50 to 80 M workers into job loss or lower income, lower skilled jobs and part time, temporary, and gig jobs.

    o The 10% VAT can reduce the Freedom Dividend to $900 a month ($10,800 a year), but necessities such as food and medicine are EXEMPT from VAT.

    o There will be fewer homeless. Two, three, or four adults can meld $24K, $36K, $48K and share a home and look for work, without the dreadful fear that benefits will be cut off.

    An AVERAGE American's income of $31,000 is increased 38.7% to $43,000 by the Freedom Dividend.

    https://en.wikipedia.org/wiki/Personal_income_in_the_United_States

    Yang's UBI increases an AVERAGE household's income of $61,000 a year (with 2.6 people)

    o By 19% to $73K if one adult;

    o By 39% to $85K if two adults;

    o By 58% to $97K if three adults;

    o By 78% to $109K if four adults.

    https://en.wikipedia.org/wiki/Household_income_in_the_United_States

    Benefits of UBI will go to —

    o Millions raising their children (80 M households), spouses and singles (25% of US parents, 20 M, are unmarried).

    o Millions (20 M) enrolled in higher education to better contribute to society.

    o Millions who stay at home caring for incapacitated loved ones and family members.

    o Millions of seniors and others who have difficulty with their physical skills, endurance and abilities, with limited or no resources to help them.

    o Millions who have psychiatric problems and limited or no resources to help them.

    UBI's TRICKLE UP ECONOMICS AT WORK. UBI Primes the Pump of the American Capitalist Engine! UBI helps displaced workers transition from the old economy to the new one and stimulate local economies.

    o Expensive, better off cities continue to draw people, many who can't make a living wage there. FAR MORE hold themselves back, shackled by ties that bind, such as underwater mortgages and family commitments; staying in less costly distressed communities that are suffering job loss from automation, outsourcing, offshoring and other forces.

    o Each jobless or job "impaired" person is someone who can't buy food. Or clothes. Or pay for a car, like gas and insurance. Or housing – they can't pay the current rent, so they leave their apartment, and there aren't enough people left to pay that same amount of rent for that apartment.

    o So the landlord lowers the rent – and loses money. Money they don't have to spend on repairs and maintenance of the apartment, so there is less work for the trades, meaning less raw materials will be needed, so less people to mine, harvest or produce those raw materials… Etc.

    o UBI will be a god send and life saver not only for the jobless and job impaired, but also for local landlords, and for multitudes of suppliers of services and products. UBI's trickle up economics will help stabilize the rental income erosion, allow people to make housing repairs, fix cars, recycle UBI money back into the market places of distressed areas, rejuvenate local civic activities, rebuild local businesses in services and goods.

    o As local consumers get healthier and stronger, so does local buying power, and America's capitalism grows healthier and stronger all the way back up the line.

    o Businesses will immediately see far more purchasing power from a far larger number of consumers directly and indirectly receiving the benefits of UBI.

    o Andrew Yang says, "In my opinion, you should not have to leave your home town or your state to make a good living; … AND if you want to, UBI will make it easier for you to move."

    UBI will revitalize our economy. The huge injection of widespread purchasing power will immediately and continuously power the pump. All the big Fat Cat businesses will reach into their offshore Piggy Banks, borrow more from the Fed, and invest more into all locales of our economy.

    UBI Dollar Benefits by ZIPCODE or COUNTY

    https://givedirect.io/yang/?fbclid=IwAR1qRrbR6sOIlyMyLMUF0RlpyeyyQd0V-IS2kdtLqxQjkEAlGu5elhhDFyQ

    /1/ Unworkable are the Wealth Taxes of Sanders (1% to 8% of wealth for those earning over $32M to over $10B a year) and Warren (2% to 3% of household wealth over $50M to over $1B).

    Wealth tax is easily avoided: by hiding wealth, by manipulating ANNUAL assessment values, by cherry picking comparables, by aggressive valuation experts, by related party transfers with strawman, private partnerships, private companies, trusts, by manipulated loss transactions, by converting assets into untraceable assets, by transfers offshore and hiding wealth offshore. Large sums of money, attract hordes of incredibly smart lawyers, accountants, and island nations offering their services like flies to other deposits of excess.

    Wealth tax escapees will result in divorces to right size and citizenship exits to right fit. Ten of 14 countries quit their wealth tax as unworkable, even France.

    /2/ Fake because Unlawful or Illegal: Federal direct taxes are restricted by our constitution under Art 1, Sections 2, 8, and 9 clause 4. Federal Wealth Taxes (direct taxes) are barred unless it is a direct tax apportioned to states by census.

    This means a smaller populated "wealthier" state, Connecticut, will pay less Wealth Tax than a larger populated less wealthy state, Alabama. This is why there has NEVER been a federal Wealth Tax as proposed. Only states can enact direct taxes that are not apportioned by census, and they do so based on the value of both real property and personal property taxes.

    So any progressive, unapportioned direct federal on wealth, even varied by income level, as planned by Bernie, are NOT allowed by our constitution; NOT by our conservative court; NOT by our US legislators.

    https://gspp.berkeley.edu/news/news-center/the-constitutionality-of-a-net-worth-tax

    /3/ Our 63% labor force participation rate means our 160 million labor force participants are 63% of a cohort of 254 M working age labor force (in population of 330 M), and MEANS THAT 94 MILLION WORKING AGE PEOPLE ARE JOBLESS. Anyone who did not look for work in the last 4 weeks is reclassified from being unemployed in the active labor force into the inactive jobless "nonparticipant" group.

    /4/ Of the 160 M employed labor force participants, 78 MILLION ARE EARNING NEAR OR BELOW POVERTY WAGES, and are "hustling for dimes," working in the gig economy.

    https://www.marketwatch.com/story/if-the-economy-is-so-great-why-are-78-million-hustling-for-dimes-2018-06-01

     https://en.wikipedia.org/wiki/Poverty_in_the_United_States

    https://www.yang2020.com/policies/

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