Hedge fund manager Daniel J. Arbess calls for direct money printing to Treasury

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There is another possible solution. A decade ago in a widely noted speech, Ben Bernanke, then a Federal Reserve governor, encouraged Japan to finance tax cuts with money printed by the central bank and credited directly to the budgetary arm of the government without issuing any more interest-bearing debt. This idea was first proposed by Milton Friedman in 1948, who likened it to a "helicopter drop" of money for combating deflation. Today "helicopter money" is more politely called "overt monetary finance."

The Fed has already printed about $2.5 trillion of new money. Overt monetary finance might offer a more direct way to channel that money into the economy than trying to push debt through banks to the private sector. Such an approach would bypass the credit channel and send cash straight to the Treasury, where it would be deployed as directed by Congress.

The Fed would be making the equivalent of an equity investment in the Treasury, which is important because it is prohibited by law from directly buying Treasury debt. This mechanism might offer an optimum combination of fiscal and monetary stimulus without increasing private or public debt.

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Overt monetary finance is only a crisis-fighting tool. Once the economy stabilizes, the nation's elected leaders must find a responsible way to correct the nation's long-run budgetary imbalances.

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