First the weird metaphor of throwing money from helicopters on wall street (who invented that & why?)
See Liquidity Trap

Milton Friedman suggested that a monetary authority can escape a liquidity trap by bypassing financial intermediaries to give money directly to consumers or businesses. This is referred to as a money gift or as helicopter money (this latter phrase is meant to call forth the image of a central banker hovering in a helicopter, dropping suitcases full of money to individuals). Political considerations make it difficult for a monetary authority to grant the money gift, because individuals and firms not receiving free money will exert political pressure. The monetary authority must act covertly to give gift money to specific individuals or firms without appearing to give money away. During the Great Depression in the United States, the Federal Reserve offered to buy any gold at a price well above current market prices. This was essentially a money gift to gold holders. In Japan in the 1980s, the Bank of Japan began buying newly-issued common stock and bond as a hidden money gift to firms.

from an old memory of watching helicopter gunships in the distance firing long undulating strings of tracers into the night sky. An oddly beautiful almost transcendent spectacle when detached from intent and effect.

Posted by: b | Mar 15 2008 19:59 utc | 3

My understanding of the difference between a deficit generated through banks and a deficit generated by “helicopter drop” i.e. tax cut, is the following. When the State , that is the government deals with the economy through banks , the government is reinforcing the class structure of society. Every time a bank obtains state funds it obtains a right to a little cut, a profit, that is pocketed by the members of the banking governance which is intimately related to the class of alumni from the great universities and colleges and they are usually the scions of well entrenched families. The use of the money cannot be but a result of class consciousness even if this consciousness is unconscious. Opera and symphonies are privileged by the upper classes while basket ball courts may not be. The same goes for business, the business favored by the banks are businesses that are suitable for the mental class of bankers. Eventually the class consciousness comes into collision with reality and then a resuscitation of society becomes necessary and that process must bypass the banks. The money must go directly to the people so that the people by their choices indicate new avenues, new desires, new needs. The money may come through ” stimulus packages” or tax cuts but the functional result is to free the economy from the grasp of the banking class which is the university class, the great bureaucratic class, the Hegelian universal class which is the one that opposes itself to the productive classes. So the idea of helicopters dropping money, absurd or silly as it may seem, is a corrective to the petrification of the State by the elites and ruling classes.

Posted by: jlcg | Mar 15 2008 21:19 utc | 5

At #3. It amazes me when Friedman quotes Keynes. Their policies were quite different. Friedman believed in the economics of the decade before the Great Depression, Keynes believed government had a positive roll by building infrastructure, transfer payments like welfare and Social Security etc.
The Bushies and presidents before him have used government stimulus (military)and 1920s economics.
The fact is all money is loaned through intermediaries called banks. In fact the Fed as everyone likely knows is a quasi public/quasi private institution with stock holders. It will be hard for the helicoptor effect when the owners would lose money. The fed must do it though.
The problem is loaned money isn’t going to solve the problem even if the fed did prime directly. It must basically hand dollars directly to individuals to pay down debts at least to the level of actual asset prices. As I stated before, there is never enough money in the system to pay debts back. Jerome a Paris had a spot on post at Kos today about this.

Posted by: jdp | Mar 15 2008 22:31 utc | 7

When I see your work, anna missed, I’m always humbled.
Straight to the gut it is. I’d like to have a fraction of your vision.
Thank you. Again.

Posted by: beq | Mar 15 2008 23:43 utc | 9

thanks anna missed. still haven’t exactly figured this one out, but i’ve been looking at it repeatedly & it even popped into my mind while wandering thru the desert aisle in the local supermarket.

Posted by: b real | Mar 17 2008 5:01 utc | 11