by Charles Hugh Smith
Of Two Minds
In effect, helicopter money turns the entire economy into a Ghost City.
The possibility that Japan might launch helicopter money stimulus sent global stock markets soaring in a paroxysm of pleasurable anticipation. But exactly what is helicopter money and what connection does it have to stock valuations, if any?
Broadly speaking, helicopter money is government deficit spending that is directed to households rather than the financial sector. Deficit means the government doesn’t have extra cash to pay for the stimulus program–it borrows it by selling government bonds.
With interest rates near-zero or even negative, it doesn’t cost governments much to borrow huge sums from future taxpayers. All bonds are borrowed from future taxpayers, because somebody will have to pay back the principal, even if there are no interest payments due.