DEPUTY Youth and Sport Minister Wan Ahmad Fayhsal Wan Ahmad Kamal’s suggestion that Bank Negara should print money as part of a “helicopter money” policy and give it directly to the people has aroused wild thoughts in me, including a bone that is not in the anatomy.

I am confused if we have enough helicopters because the six helicopters for the army purchased and partially paid for in 2016 have yet to be delivered. Where to drop the free money is also a problem. In a north-eastern state, the risk of using it for purchasing Mercedes Benzes and raising the allowance of executive councillors is high.   

Money dropped during times of flood might get lost, as foresight is not a known attribute among our administrators if we go by the number of times we get dry taps. The evidence is in the unscrupulous timber extraction that led to floods.

Furthermore, forest raping is an easy means that does not need novel idea or hard thinking to expand the state coffers. Examples are quite a few where forest pillage appears to be the primary source of income for both the state and individuals.

If ever there is a Rang-Tan 2.0 Christmas video launched against our forest, I am not sure if I still have the nationalistic spirit to defend our oil palm industry as I previously did.

Several times I argued for our palm oil being superior to other edible oils – including my contention that saturated fats was not the cause of heart disease but lack of vitamin C was – a Robbie Isgod would target me with abusive language. 

I am wonderstruck between the possibility of a preying ghost-writer and a Luciferian agenda of the West against our palm oil. Perhaps both.

Pardon me, as the ridiculous suggestion brought equally ridiculous thinking in me.

In the interview with radio station BFM regarding debt forgiveness for the citizens, Wan Fayhsal suggested, “Helicopter money monetary policy where the central bank can directly print money and give directly to the people so that they can spend.”  

He had unwittingly taken the terms helicopter money and money printing to their literal meanings.

Famed American economist Milton Friedman first coined the term “helicopter drop” in a parable in 1969. Former Fed Chairman Ben Bernanke alluded to the term later in 2016.

Both were using the term metaphorically and mentioned helicopter money when discussing the hypothetical economic situations to prevent deflation.  

Bernanke had also made it clear that the rhetorical term, “helicopter drop” of money was meant to be an expansionary fiscal policy. It was never meant to be construed as the central bank actually printing money, rather a metaphor for money creation.

Money creation and printing money have different connotations. Printing money will increase the money supply of M1, the most liquid comprising cash and cheques.

M2 is M1 plus the less liquid time deposits and money market funds, and is usually closely monitored for money supply and indication of future inflation. M3 is M2 plus the least liquid financial instruments. Printing money will certainly increase M1/M2.

Money creation can be conducted through the central bank’s open market operations by purchasing securities (convertible and tradable financial instruments) in the open market and driving the expansion of its balance sheet. 

Creating bank reserves issued to commercial banks that, in turn, through fractional reserve banking give out loans, is a form of money creation. Fiscal deficit spending and financing through the banking system leads to increased money supply and an inflationary effect, hence is also a form of money creation.

Helicopter money may be linked with the modern monetary theory (MMT) through money creation, but not money printing. MMT argues for governments to create money and directly fund public expenditure.

Originally the proponents of MMT described central banks making payments directly to individuals. Over time this concept has been refined to suggest central banks creating money – including tradable financial instruments and borrowing from their own currencies – for funding deficit spending so long as employment and production in the economy have not reached maximum capacity.  

Supporters of Wan Fayhsal’s MMT assertion have cited cases of the current economic sustenance of Japan and the US.

In fact, both countries are bad examples. Japan is well known for its lost decade since the 1990, a consequence due to a large extent of its rampant money creation.

In the case of the US, quantitative easing from 2007 to 2015 led to the Fed balance sheet to balloon from US$870 billion to US$4.5 trillion.

During this period, US$3.6 trillion was created. US$12.3 trillion was created by all central banks (according to a CNBC report in 2016), and went into creating a worldwide artificial boom. Yet, we are witnessing little to zero growth in the US and in most parts of the world, along with a deflating balloon. 

Malaysians should take the suggestion of “helicopter money” as a joke. – November 26, 2020.

* Captain Dr Wong Ang Peng is a researcher with an interest in economics, politics, and health issues. He has a burning desire to do anything within his means to promote national harmony. Captain Wong is also a member of the National Patriots Association.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.