If we are in a deflationary spiral, aka a “liquidity trap,” and I believe that we are, then one of the questions is how does one get us out.

suggests that it is essential for the Federal Reserve to engage in actions that make it blindingly clear that holding to cash will be long term disastrous.

The problem right now is that, with inflation being negative, people are all too willing to sit on their cash.

John Hempton has a most unorthodox proposal, that we literally drop large amounts of currency onto the streets of American cities:

You need to convince people not to hold money. You need to convince them that cash is trash.

And to do that you need to convince the public that there will be inflation (the above gross leverage argument notwithstanding).

To do that the Federal Reserve has to be credibly irresponsible. It is not enough to print a couple of trillion dollars (which they have) because everyone thinks (with some justification) that they will suck back the money supply when the crisis is over.

No – you have to be more visibly reckless than that. You have to really convince people that there will be inflation.

So the suggestion in my title is literal. The Federal Reserve should hire a couple of hundred helicopters and load each one 10 million dollars in neatly bound parcels of $1000 each. Total cost $2 billion plus trivial helicopter hire.

Well, running the numbers, a dollar bill weighs about a gram, so let’s bundle 10 $100 bills together, so as not to create an “As God as my witness, I thought turkeys could fly,” issue.

So, $1000.00 would weigh about 11 grams (adding 1g for the wrapper), which means that if you have a helicopter carrying 4400kg in currency, they would be carrying $400,000,000.00.

So he’s wrong. You would only need 5 medium to heavy lift helicopters, or 1 Mi-26, which has a payload of 22 metric tonnes.

You probably want to spread it a bit further out, but still you are well under 100 helicopters, particularly if you allow them to make multiple trips.

Heck, even a Robinson R22 helicopter could carry more than $10 million per sortie.