I give my kids $100 and tell them to spend it not save it.
1. How can I tell whether my kids have really spent $100 more than they otherwise would have spent? Maybe they would have spent $100 anyway.
2. How can my kids tell whether I have really given them $100 more than I otherwise would have given them? Maybe I would have given them that $100 (plus interest) anyway, in my will, and I am simply giving it to them earlier rather than later. Maybe it's not a permanent increase in the amount of money I give them. Maybe they aren't any wealthier than they would have been otherwise.
Simon Wren-Lewis's proposal for "Democratic Helicopter Money" , in which the central bank prints an extra $1 billion, gives it to the government, and tells the government to spend it not save it, faces exactly the same two problems.
The government owns the central bank, which is like the government being the sole beneficiary in the central bank's will. Any profits the central bank earns from printing money must eventually get given to the government anyway. If the extra $1 billion is a permanent increase in base money, relative to what the time-path of base money would otherwise have been, then the government is $1 billion wealthier, whether it gets that $1 billion now or later (plus interest), and it must get it eventually. And if it's not a permanent increase in base money, relative to what the time-path of base money would otherwise have been, the government is not $1 billion wealthier, so an extra $1 billion fiscal deficit will be bond-financed, not money-financed, sooner or later.
Money is fungible. Helicopter Money is permanent, or it's not Helicopter Money. True Helicopter Money is equivalent to an increase in the Price Level Path (or NGDP Level Path) target.
(There's definitely a Principal-Agent Problem, and maybe a Rotten Kid Theorem, in here somewhere.)
[I've said all this before, but maybe I've said it clearer and simpler this time. Does the kid analogy work?]
Update: Simon responds.