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Helicopter money

Today FT's Alphaville flags the Hong Kong government's plan to pay HKD 10,000 (USD 1,283) to each adult permanent resident.

What interests me in this post is Alphaville's characterization of this intervention as "helicopter money." Helicopter money: the means of payment wantonly distributed, cast indiscriminately from above onto a desperate populace waiting with arms outstretched. If it is monetary policy, then it is extreme, an undermining of the sanctioned claims to wealth.

Extremism perhaps reveals the desperation on the part of the helicopter operator as well: helicopter money undermines existing debt claims, and so represents a reluctant release of a claim upon the system. Institutionally cognizant commentators insist we must consider the concomitant balance-sheet operations: how is the cash drop financed? In this case, the SCMP tells us,

[Financial Secretary Paul Chan Mo-po] has been under intense pressure from lawmakers to dip into the government's large fiscal reserves of about HK$1.1 trillion to help the city ride out the economic slump.

So the HK government has money in the bank, claims on its own banking system, and will transfer these claims to its permanent residents. It is a way of spending down an already-banked surplus.

Helicopter money should be understood in relationship to debt: if what matters is getting cash in the hands of people who would spend it, then we must recognize that those people, understood as desperate in some way, are being crushed under some form of debt. This is a nod towards debt forgiveness, in a way that intermediates using government funding rather than doing anything to address the debt relationship itself. Creditors remain creditors, while the cash infusion, at best, lightens the load for a brief period for debtors.