Monetary gifts from the state secure the existence

In the United States and Japan, the government wants to give money to private households in the form of helicopter money. Actually, helicopter money is understood to be the direct provision of central bank liquidity to consumers in order to increase inflation. In this case, however, the money would come directly from the government and would thus be financed by an increase in government debt.

Since no fresh money is put into circulation by the central bank, the effects on inflation are smaller. This results in a redistribution of government debt to private households. The focus is on consumer activity, which is to be supported by this measure. The quarantine measures as well as the travel and going out bans lead to severe restrictions on social economic life and thus to a slump in consumption.

Helicopter money can therefore help to alleviate the decline in overall economic demand. There is a risk that not all private households will use the money for consumption. However, for those who lose their jobs and have hardly saved anything at all, the cheques can temporarily be a great help. Helicopter money is available faster than tax cuts and households immediately have more in their pockets.

In those countries that do not have a strong support system to bridge unemployment, the gift of money from the state can indeed be a good solution. In countries such as Germany, which have short-time work benefits, a high level of protection against dismissal and a low proportion of a-typical employment, such a measure is not necessary because short-time work benefits are a kind of helicopter allowance.

The corona pandemic is a temporary phenomenon, as sooner or later drugs and/or a vaccine should be available. In order to bridge this period, secure livelihoods and alleviate the loss of demand, helicopter money or short-time work benefits may be useful temporarily. What one chooses ultimately depends on the social system of the country and of course on the financial possibilities.

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