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The Myth of “Helicopter Money”

Since the United States adopted a $2.1 trillion rescue package to complement unprecedented action by the US Federal Reserve in response to the COVID-19 crisis, the media have been amplifying popular misconceptions about Modern Monetary Theory. So, what does MMT actually say about financing government borrowing and spending?

NEW YORK – Modern Monetary Theory has received unprecedented attention now that policymakers are pursuing extraordinary economic-policy measures to combat the COVID-19 pandemic. Discussing the US Federal Reserve’s “whatever it takes approach,” CNBC’s Joe Kernen recently concluded that, “we are all MMTers now.” And in a recent commentary, Willem H. Buiter of Columbia University claimed that, “Much of the US response [to the pandemic] will come in the form of ‘helicopter money,’ an application of [MMT] in which the central bank finances fiscal stimulus by purchasing government debt issued to finance tax cuts or public spending increases.”