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The Helicopters Are Coming

Summary:
With the economic situation in many advanced economies rapidly deteriorating, policymakers are rolling out unprecedented stimulus programs, setting the stage for what amounts to a massive experiment with hitherto unorthodox Modern Monetary Theory. Today's extraordinary problems, it would seem, require extraordinary solutions. NEW YORK – With the COVID-19 pandemic intensifying, the United States has just adopted a trillion economic-rescue package (equal to 9.2% of 2019 GDP). The legislation follows unprecedented actions by the US Federal Reserve, which will engage in open-ended quantitative easing, and has introduced new mechanisms to backstop businesses and keep credit flowing. Insuring the

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With the economic situation in many advanced economies rapidly deteriorating, policymakers are rolling out unprecedented stimulus programs, setting the stage for what amounts to a massive experiment with hitherto unorthodox Modern Monetary Theory. Today's extraordinary problems, it would seem, require extraordinary solutions.

NEW YORK – With the COVID-19 pandemic intensifying, the United States has just adopted a $2 trillion economic-rescue package (equal to 9.2% of 2019 GDP). The legislation follows unprecedented actions by the US Federal Reserve, which will engage in open-ended quantitative easing, and has introduced new mechanisms to backstop businesses and keep credit flowing.

Much of the US response will come in the form of “helicopter money,” an application of Modern Monetary Theory (MMT) in which the central bank finances fiscal stimulus by purchasing government debt issued to finance tax cuts or public spending increases. The US economy is deteriorating at a spectacular rate, partly because...

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