I understand if you're against the idea of giving people money. But this is just giving money to mostly the rich. Neo-trickle down economics.
The Fed doesn’t have the legal authority to do this. That’s why the Congress is passing stimulus bills.
The Fed is focussing on our liquidity problem. That keeps solvent companies from going under due to illiquidity.
Congress, and helicopter money, are needed to solve the solvency problem prompted by demand destruction.
Is the argument that the Fed is better than private households in being a distressed investor? Or that wealthy households would decide to cash in the check from the government and literally store it under their mattresses instead of investing it (directly or indirectly) and add to the liquidity?
One, it is not targeted. The Fed can pump vast quantities of liquidity into the heart of the credit markets in a way private actors aren't set up to.
Two, it is not fast enough. Companies will go bust while waiting for politicians to authorize a cheque, the Treasury to cut it, investors to cash it and then to identify and decide upon an investment.
Three, it isn't reliable. Investors trust the Fed's discount window will be open in a crisis. That knowledge, itself, stops many runs before they start.
Four, it's riskier. Helicopter money cuts cheques. Once it's done, the money is out the door. The government is never getting it back. If they sent out too much, we'll have inflation. Monetary policy involves collateralized loans. The collateral limits downside. And unwinding a loan is easier than raising taxes to drag surplus cash out of the economy.
If I knew that the policy was going to be that every time there is a liquidity crisis people will be getting checks (or electronic payments), then I wouldn't be scared of any runs in the same way. Again, is the argument that the Fed is better than private households in being a distressed investor?
Helicopter money can be taxed back. I know that is unlikely but so is the probability that the Fed's balance sheet going to zero: https://fred.stlouisfed.org/series/WALCL.
The Fed can do this at all right now because we created a body of subject-matter experts and deputized them to pull the trigger without having to check with anyone. This is a rare thing in a democratic government, and is possible mostly because we have given them boring powers that only wonky people bother to even read what they are. Even then, a few people read what they are and complain about them, so even that is a bit perilous.
If you wanted the Fed or a Fed-like mobilization for the helicopter money you first need to make the process of getting $1000 boring, or wonky, or at least politically uncontroversial so that people accept an unelected body of bureaucrats outside the government process doing it unilaterally in the middle of the night without telling the rest of the government. I would not rule out those conditions being the case at the end of this crisis, but they aren't the case at the beginning.
But the way we solve political problems (or, more recently, the way we don't solve them) is through Congress, which is an inherently slower approach.
- The Fed operates under a dual mandate. It is tasked with managing both inflation and unemployment.
- Its mechanisms are "open market operations" (the purchase and sale of assets, usually government bonds, though occasionally other securities), "the overnight window" (a lending operation for banks needing cash, lent at a benchmark "prime" interest rate), and bank reserve requirements.
These adjust the total amount of dollars in the financial system, the basis for interest rates (the cost of renting money), and the multiplier by which banks themselver create money through loans.
It's not either-or, it's both-and.
* https://twitter.com/paulkrugman/status/1241690862448529408
Helicopter money has many other desirable characteristic, like a much short lag to get into the real economy (so the government can adjust it with an easier to control bullwhip effect) and its wide distribution meaning that it distorts less one market or another.
There are very few reasons to explain why a government would make money creating so unconstrained that banks actually do not create as much as they can, and allow interest rates to go negative, instead of going for the helicopters.
Helicopter money is revenue negative and the created cash cannot be recovered.
Congress could do everybody a huge favor right now by printing quite a lot of money and handing it out. Which would address the deflationary forces created by the demand destruction of the coronavirus in the short term and allow the Fed to actually raise interest rates after the pandemic is over.