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Bernanke Essay


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Just read the following essay by Ben Bernanke on Japanese monetary policy and there is plenty to chew over for those trying to explain the recent US experience and what might come later. It also provides evidence of his famous 'helicopter drop' quotes.

http://www.petersoninstitute.org/publicati...19/7iie289X.pdf

What I am confused is the following statement (p162) :

"I think most economists would agree that a large enough helicopter drop must raise the price level...........................................................................

The only counterargument I can I can imagine is that the public might fear a future lump sumtax on wealth, inducing them to hold rather than spend extra balances. The newly circulated cash bears no interest and thus has no budgetary implications for government if prices remain unchanged"

Ok, here's what I dont understand: Why would there be NO BUDGETARY IMPLICATIONS in this scenario. We often talk of future generations picking up the bill of government deficit/spending, but apparently this is not the case.

Can anyone explain this feature in what is a fascinating read.

Thanks

http://www.petersoninstitute.org/publicati...19/7iie289X.pdf

Edited by desertorchid
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