As fears grow that the coronavirus pandemic will cause a global recession, a radical proposal is gaining traction. If central banks – or governments backed by central banks – gave money directly to households, could that help to prevent a crisis turning into a depression?
The American economist Jason Furman thinks it could. He proposes that every American should be given $1000. Other economists and commentators have followed his lead. Nouriel Roubini has backed Congresswoman Tulsi Gabbard’s proposal for “helicopter drops” of $1000 to every American until the crisis is over. Harvard economist Greg Mankiw and journalist John Carney have both made a similar call. In Australia, Prime Minister Morrison proposes giving pensioners and people on certain benefits AU$750 each.
I think they are wrong. This is not the right time for helicopter money. And if helicopter money is used at the wrong time and for the wrong purpose, there is a real risk that it won’t work and will then be dismissed as useless.
