The Federal Reserve will have to be creative in the next recession
“The idea that in such circumstances there is a case for making a countercyclical ‘helicopter money’ drop – in which a central bank pumps cash into the economy — is one area in which so-called modern monetary theory is correct: when there is no doubt, shovel it out.”
USAGOLD note: Buiter argues in this opinion piece that the Fed is restricted in what it can do to aid the economy because it will not violate zero percent interest rates – a ‘binding constraint’ that if violated would create ‘upheaval’ among money market funds. That leaves quantitative easing as the logical course of action for the Fed. Not only does Buiter see QE as on the horizon, he also sees MMT, helicopter money and large doses of fiscal stimulus as options should the U.S. enter a recession.