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It Begins: "Central Banks Should Hand Consumers Cash Directly"
... A broad-based tax cut, for example, accommodated by a program of open-market purchases to alleviate any tendency for interest rates to increase, would almost certainly be an effective stimulant to consumption and hence to prices. Even if households decided not to increase consumption but instead re-balanced their portfolios by using their extra cash to acquire real and financial assets, the resulting increase in asset values would lower the cost of capital and improve the balance sheet positions of potential borrowers. A money-financed tax cut is essentially equivalent to Milton Friedman's famous "helicopter drop" of money
- Ben Bernanke, Deflation: Making Sure "It" Doesn't Happen Here, November 21, 2002
A year ago, when it became abundantly clear that all of the Fed's attempts to boost the economy have failed, leading instead to a record divergence between the "1%" who were benefiting from the Fed's aritficial inflation of financial assets, and everyone else (a topic that would become one of the most discussed issues of 2014) and with no help coming from a hopelessly broken Congress (who can forget the infamous plea by a desperate Wall Street lobby-funding recipient "Get to work Mr. Chariman"), we wrote that "Bernanke's Helicopter Is Warming Up."
The reasoning was very simple: in a country (and world) drowning with debt, there are only two options to extinguish said debt: inflate it away or default. Anything else is kicking the can while making the problem even worse. Because while the Fed has been successful at recreating the world's biggest asset bubble (in history), it has failed to stimulate broad, "benign" demand-pull inflation as the trickle down effects of its "wealth effect" have failed to materialize 6 years after the launch of the Fed's unconventional monetary policies.
In other words, a world stuck in the last phase before complete Keynesian collapse, had no choice but to gamble "all in" with the last and only bluff it had left before admitting the economic system it had labored under, one which has borrowed so extensively from the future to fund the present that there is no future left, has failed.
The only question left was when would the trial balloons for such monetary paradrops start to emerge.
We now know the answer, and it is today.
Moments ago a stunning article appearing in the "Foreign Affairs" publication of the influential and policy-setting Council of Foreign Relations, titled "Print Less but Transfer More: Why Central Banks Should Give Money Directly to the People."
In it we read the now conventional admission of failure by Keynesians, who however, unwilling to actually admit they have been wrong, urge the even more conventional solution: do more of the same that has lead to the current financial cataclysm, only in this case the authors advocate no longer pretending that the traditional monetary channels work but to, literally, paradrop money. To wit:
To some extent, low inflation reflects intense competition in an increasingly globalized economy. But it also occurs when people and businesses are too hesitant to spend their money, which keeps unemployment high and wage growth low. In the eurozone, inflation has recently dropped perilously close to zero. And some countries, such as Portugal and Spain, may already be experiencing deflation. At best, the current policies are not working; at worst, they will lead to further instability and prolonged stagnation.
Governments must do better. Rather than trying to spur private-sector spending through asset purchases or interest-rate changes, central banks, such as the Fed, should hand consumers cash directly. In practice, this policy could take the form of giving central banks the ability to hand their countries’ tax-paying households a certain amount of money. The government could distribute cash equally to all households or, even better, aim for the bottom 80 percent of households in terms of income. Targeting those who earn the least would have two primary benefits. For one thing, lower-income households are more prone to consume, so they would provide a greater boost to spending. For another, the policy would offset rising income inequality.
A third, and most important outcome, would be the one we have forecast from the beginning of this ridiculous central bank experiment: "hyperinflation" (which is not simply runaway inflation as it is often incorrectly designated - it is outright evisceration of the prevailing monetary system), which has been avoided for now, but which is inevitable in a world in which only the wholesale destruction of the fiat reserve currency is the one option left to inflate away the debt overhang.
So without further ado, here is the first official trial balloon - the article that one day soon will be seen as the canary in the paradropmine, and the piece that will finally get the rotor of Bernanke's, now Yellen's infamous helicopter finally spinning. Highlights ours:
Print Less but Transfer More: Why Central Banks Should Give Money Directly to the People
From Foreign Affairs, by Mark Blyth and Eric Lonergan
In the decades following World War II, Japan’s economy grew so quickly and for so long that experts came to describe it as nothing short of miraculous. During the country’s last big boom, between 1986 and 1991, its economy expanded by nearly $1 trillion. But then, in a story with clear parallels for today, Japan’s asset bubble burst, and its markets went into a deep dive. Government debt ballooned, and annual growth slowed to less than one percent. By 1998, the economy was shrinking.
That December, a Princeton economics professor named Ben Bernanke argued that central bankers could still turn the country around. Japan was essentially suffering from a deficiency of demand: interest rates were already low, but consumers were not buying, firms were not borrowing, and investors were not betting. It was a self-fulfilling prophesy: pessimism about the economy was preventing a recovery. Bernanke argued that the Bank of Japan needed to act more aggressively and suggested it consider an unconventional approach: give Japanese households cash directly. Consumers could use the new windfalls to spend their way out of the recession, driving up demand and raising prices.
As Bernanke made clear, the concept was not new: in the 1930s, the British economist John Maynard Keynes proposed burying bottles of bank notes in old coal mines; once unearthed (like gold), the cash would create new wealth and spur spending. The conservative economist Milton Friedman also saw the appeal of direct money transfers, which he likened to dropping cash out of a helicopter. Japan never tried using them, however, and the country’s economy has never fully recovered. Between 1993 and 2003, Japan’s annual growth rates averaged less than one percent.
Today, most economists agree that like Japan in the late 1990s, the global economy is suffering from insufficient spending, a problem that stems from a larger failure of governance. Central banks, including the U.S. Federal Reserve, have taken aggressive action, consistently lowering interest rates such that today they hover near zero. They have also pumped trillions of dollars’ worth of new money into the financial system. Yet such policies have only fed a damaging cycle of booms and busts, warping incentives and distorting asset prices, and now economic growth is stagnating while inequality gets worse. It’s well past time, then, for U.S. policymakers -- as well as their counterparts in other developed countries -- to consider a version of Friedman’s helicopter drops. In the short term, such cash transfers could jump-start the economy. Over the long term, they could reduce dependence on the banking system for growth and reverse the trend of rising inequality. The transfers wouldn’t cause damaging inflation, and few doubt that they would work. The only real question is why no government has tried them.
EASY MONEY
In theory, governments can boost spending in two ways: through fiscal policies (such as lowering taxes or increasing government spending) or through monetary policies (such as reducing interest rates or increasing the money supply). But over the past few decades, policymakers in many countries have come to rely almost exclusively on the latter. The shift has occurred for a number of reasons. Particularly in the United States, partisan divides over fiscal policy have grown too wide to bridge, as the left and the right have waged bitter fights over whether to increase government spending or cut tax rates. More generally, tax rebates and stimulus packages tend to face greater political hurdles than monetary policy shifts. Presidents and prime ministers need approval from their legislatures to pass a budget; that takes time, and the resulting tax breaks and government investments often benefit powerful constituencies rather than the economy as a whole. Many central banks, by contrast, are politically independent and can cut interest rates with a single conference call. Moreover, there is simply no real consensus about how to use taxes or spending to efficiently stimulate the economy.
Steady growth from the late 1980s to the early years of this century seemed to vindicate this emphasis on monetary policy. The approach presented major drawbacks, however. Unlike fiscal policy, which directly affects spending, monetary policy operates in an indirect fashion. Low interest rates reduce the cost of borrowing and drive up the prices of stocks, bonds, and homes. But stimulating the economy in this way is expensive and inefficient, and can create dangerous bubbles -- in real estate, for example -- and encourage companies and households to take on dangerous levels of debt.
That is precisely what happened during Alan Greenspan’s tenure as Fed chair, from 1997 to 2006: Washington relied too heavily on monetary policy to increase spending. Commentators often blame Greenspan for sowing the seeds of the 2008 financial crisis by keeping interest rates too low during the early years of this century. But Greenspan’s approach was merely a reaction to Congress’ unwillingness to use its fiscal tools. Moreover, Greenspan was completely honest about what he was doing. In testimony to Congress in 2002, he explained how Fed policy was affecting ordinary Americans:
"Particularly important in buoying spending [are] the very low levels of mortgage interest rates, which [encourage] households to purchase homes, refinance debt and lower debt service burdens, and extract equity from homes to finance expenditures. Fixed mortgage rates remain at historically low levels and thus should continue to fuel reasonably strong housing demand and, through equity extraction, to support consumer spending as well."
Of course, Greenspan’s model crashed and burned spectacularly when the housing market imploded in 2008. Yet nothing has really changed since then. The United States merely patched its financial sector back together and resumed the same policies that created 30 years of financial bubbles. Consider what Bernanke, who came out of the academy to serve as Greenspan’s successor, did with his policy of “quantitative easing,” through which the Fed increased the money supply by purchasing billions of dollars’ worth of mortgage-backed securities and government bonds. Bernanke aimed to boost stock and bond prices in the same way that Greenspan had lifted home values. Their ends were ultimately the same: to increase consumer spending.
The overall effects of Bernanke’s policies have also been similar to those of Greenspan’s. Higher asset prices have encouraged a modest recovery in spending, but at great risk to the financial system and at a huge cost to taxpayers. Yet other governments have still followed Bernanke’s lead. Japan’s central bank, for example, has tried to use its own policy of quantitative easing to lift its stock market. So far, however, Tokyo’s efforts have failed to counteract the country’s chronic underconsumption. In the eurozone, the European Central Bank has attempted to increase incentives for spending by making its interest rates negative, charging commercial banks 0.1 percent to deposit cash. But there is little evidence that this policy has increased spending.
China is already struggling to cope with the consequences of similar policies, which it adopted in the wake of the 2008 financial crisis. To keep the country’s economy afloat, Beijing aggressively cut interest rates and gave banks the green light to hand out an unprecedented number of loans. The results were a dramatic rise in asset prices and substantial new borrowing by individuals and financial firms, which led to dangerous instability. Chinese policymakers are now trying to sustain overall spending while reducing debt and making prices more stable. Like other governments, Beijing seems short on ideas about just how to do this. It doesn’t want to keep loosening monetary policy. But it hasn’t yet found a different way forward.
The broader global economy, meanwhile, may have already entered a bond bubble and could soon witness a stock bubble. Housing markets around the world, from Tel Aviv to Toronto, have overheated. Many in the private sector don’t want to take out any more loans; they believe their debt levels are already too high. That’s especially bad news for central bankers: when households and businesses refuse to rapidly increase their borrowing, monetary policy can’t do much to increase their spending. Over the past 15 years, the world’s major central banks have expanded their balance sheets by around $6 trillion, primarily through quantitative easing and other so-called liquidity operations. Yet in much of the developed world, inflation has barely budged.
To some extent, low inflation reflects intense competition in an increasingly globalized economy. But it also occurs when people and businesses are too hesitant to spend their money, which keeps unemployment high and wage growth low. In the eurozone, inflation has recently dropped perilously close to zero. And some countries, such as Portugal and Spain, may already be experiencing deflation. At best, the current policies are not working; at worst, they will lead to further instability and prolonged stagnation.
MAKE IT RAIN
Governments must do better. Rather than trying to spur private-sector spending through asset purchases or interest-rate changes, central banks, such as the Fed, should hand consumers cash directly. In practice, this policy could take the form of giving central banks the ability to hand their countries’ tax-paying households a certain amount of money. The government could distribute cash equally to all households or, even better, aim for the bottom 80 percent of households in terms of income. Targeting those who earn the least would have two primary benefits. For one thing, lower-income households are more prone to consume, so they would provide a greater boost to spending. For another, the policy would offset rising income inequality.
Such an approach would represent the first significant innovation in monetary policy since the inception of central banking, yet it would not be a radical departure from the status quo. Most citizens already trust their central banks to manipulate interest rates. And rate changes are just as redistributive as cash transfers. When interest rates go down, for example, those borrowing at adjustable rates end up benefiting, whereas those who save -- and thus depend more on interest income -- lose out.
Most economists agree that cash transfers from a central bank would stimulate demand. But policymakers nonetheless continue to resist the notion. In a 2012 speech, Mervyn King, then governor of the Bank of England, argued that transfers technically counted as fiscal policy, which falls outside the purview of central bankers, a view that his Japanese counterpart, Haruhiko Kuroda, echoed this past March. Such arguments, however, are merely semantic. Distinctions between monetary and fiscal policies are a function of what governments ask their central banks to do. In other words, cash transfers would become a tool of monetary policy as soon as the banks began using them.
Other critics warn that such helicopter drops could cause inflation. The transfers, however, would be a flexible tool. Central bankers could ramp them up whenever they saw fit and raise interest rates to offset any inflationary effects, although they probably wouldn’t have to do the latter: in recent years, low inflation rates have proved remarkably resilient, even following round after round of quantitative easing. Three trends explain why. First, technological innovation has driven down consumer prices and globalization has kept wages from rising. Second, the recurring financial panics of the past few decades have encouraged many lower-income economies to increase savings -- in the form of currency reserves -- as a form of insurance. That means they have been spending far less than they could, starving their economies of investments in such areas as infrastructure and defense, which would provide employment and drive up prices. Finally, throughout the developed world, increased life expectancies have led some private citizens to focus on saving for the longer term (think Japan). As a result, middle-aged adults and the elderly have started spending less on goods and services. These structural roots of today’s low inflation will only strengthen in the coming years, as global competition intensifies, fears of financial crises persist, and populations in Europe and the United States continue to age. If anything, policymakers should be more worried about deflation, which is already troubling the eurozone.
There is no need, then, for central banks to abandon their traditional focus on keeping demand high and inflation on target. Cash transfers stand a better chance of achieving those goals than do interest-rate shifts and quantitative easing, and at a much lower cost. Because they are more efficient, helicopter drops would require the banks to print much less money. By depositing the funds directly into millions of individual accounts -- spurring spending immediately -- central bankers wouldn’t need to print quantities of money equivalent to 20 percent of GDP.
The transfers’ overall impact would depend on their so-called fiscal multiplier, which measures how much GDP would rise for every $100 transferred. In the United States, the tax rebates provided by the Economic Stimulus Act of 2008, which amounted to roughly one percent of GDP, can serve as a useful guide: they are estimated to have had a multiplier of around 1.3. That means that an infusion of cash equivalent to two percent of GDP would likely grow the economy by about 2.6 percent. Transfers on that scale -- less than five percent of GDP -- would probably suffice to generate economic growth.
LET THEM HAVE CASH
Using cash transfers, central banks could boost spending without assuming the risks of keeping interest rates low. But transfers would only marginally address growing income inequality, another major threat to economic growth over the long term. In the past three decades, the wages of the bottom 40 percent of earners in developed countries have stagnated, while the very top earners have seen their incomes soar. The Bank of England estimates that the richest five percent of British households now own 40 percent of the total wealth of the United Kingdom -- a phenomenon now common across the developed world.
To reduce the gap between rich and poor, the French economist Thomas Piketty and others have proposed a global tax on wealth. But such a policy would be impractical. For one thing, the wealthy would probably use their political influence and financial resources to oppose the tax or avoid paying it. Around $29 trillion in offshore assets already lies beyond the reach of state treasuries, and the new tax would only add to that pile. In addition, the majority of the people who would likely have to pay -- the top ten percent of earners -- are not all that rich. Typically, the majority of households in the highest income tax brackets are upper-middle class, not superwealthy. Further burdening this group would be a hard sell politically and, as France’s recent budget problems demonstrate, would yield little financial benefit. Finally, taxes on capital would discourage private investment and innovation.
There is another way: instead of trying to drag down the top, governments could boost the bottom. Central banks could issue debt and use the proceeds to invest in a global equity index, a bundle of diverse investments with a value that rises and falls with the market, which they could hold in sovereign wealth funds. The Bank of England, the European Central Bank, and the Federal Reserve already own assets in excess of 20 percent of their countries’ GDPs, so there is no reason why they could not invest those assets in global equities on behalf of their citizens. After around 15 years, the funds could distribute their equity holdings to the lowest-earning 80 percent of taxpayers. The payments could be made to tax-exempt individual savings accounts, and governments could place simple constraints on how the capital could be used.
For example, beneficiaries could be required to retain the funds as savings or to use them to finance their education, pay off debts, start a business, or invest in a home. Such restrictions would encourage the recipients to think of the transfers as investments in the future rather than as lottery winnings. The goal, moreover, would be to increase wealth at the bottom end of the income distribution over the long run, which would do much to lower inequality.
Best of all, the system would be self-financing. Most governments can now issue debt at a real interest rate of close to zero. If they raised capital that way or liquidated the assets they currently possess, they could enjoy a five percent real rate of return -- a conservative estimate, given historical returns and current valuations. Thanks to the effect of compound interest, the profits from these funds could amount to around a 100 percent capital gain after just 15 years. Say a government issued debt equivalent to 20 percent of GDP at a real interest rate of zero and then invested the capital in an index of global equities. After 15 years, it could repay the debt generated and also transfer the excess capital to households. This is not alchemy. It’s a policy that would make the so-called equity risk premium -- the excess return that investors receive in exchange for putting their capital at risk -- work for everyone.
MO' MONEY, FEWER PROBLEMS
As things currently stand, the prevailing monetary policies have gone almost completely unchallenged, with the exception of proposals by Keynesian economists such as Lawrence Summers and Paul Krugman, who have called for government-financed spending on infrastructure and research. Such investments, the reasoning goes, would create jobs while making the United States more competitive. And now seems like the perfect time to raise the funds to pay for such work: governments can borrow for ten years at real interest rates of close to zero.
The problem with these proposals is that infrastructure spending takes too long to revive an ailing economy. In the United Kingdom, for example, policymakers have taken years to reach an agreement on building the high-speed rail project known as HS2 and an equally long time to settle on a plan to add a third runway at London’s Heathrow Airport. Such large, long-term investments are needed. But they shouldn’t be rushed. Just ask Berliners about the unnecessary new airport that the German government is building for over $5 billion, and which is now some five years behind schedule. Governments should thus continue to invest in infrastructure and research, but when facing insufficient demand, they should tackle the spending problem quickly and directly.
If cash transfers represent such a sure thing, then why has no one tried them? The answer, in part, comes down to an accident of history: central banks were not designed to manage spending. The first central banks, many of which were founded in the late nineteenth century, were designed to carry out a few basic functions: issue currency, provide liquidity to the government bond market, and mitigate banking panics. They mainly engaged in so-called open-market operations -- essentially, the purchase and sale of government bonds -- which provided banks with liquidity and determined the rate of interest in money markets. Quantitative easing, the latest variant of that bond-buying function, proved capable of stabilizing money markets in 2009, but at too high a cost considering what little growth it achieved.
A second factor explaining the persistence of the old way of doing business involves central banks’ balance sheets. Conventional accounting treats money -- bank notes and reserves -- as a liability. So if one of these banks were to issue cash transfers in excess of its assets, it could technically have a negative net worth. Yet it makes no sense to worry about the solvency of central banks: after all, they can always print more money.
The most powerful sources of resistance to cash transfers are political and ideological. In the United States, for example, the Fed is extremely resistant to legislative changes affecting monetary policy for fear of congressional actions that would limit its freedom of action in a future crisis (such as preventing it from bailing out foreign banks). Moreover, many American conservatives consider cash transfers to be socialist handouts. In Europe, which one might think would provide more fertile ground for such transfers, the German fear of inflation that led the European Central Bank to hike rates in 2011, in the middle of the greatest recession since the 1930s, suggests that ideological resistance can be found there, too.
Those who don’t like the idea of cash giveaways, however, should imagine that poor households received an unanticipated inheritance or tax rebate. An inheritance is a wealth transfer that has not been earned by the recipient, and its timing and amount lie outside the beneficiary’s control. Although the gift may come from a family member, in financial terms, it’s the same as a direct money transfer from the government. Poor people, of course, rarely have rich relatives and so rarely get inheritances -- but under the plan being proposed here, they would, every time it looked as though their country was at risk of entering a recession.
Unless one subscribes to the view that recessions are either therapeutic or deserved, there is no reason governments should not try to end them if they can, and cash transfers are a uniquely effective way of doing so. For one thing, they would quickly increase spending, and central banks could implement them instantaneously, unlike infrastructure spending or changes to the tax code, which typically require legislation. And in contrast to interest-rate cuts, cash transfers would affect demand directly, without the side effects of distorting financial markets and asset prices. They would also would help address inequality -- without skinning the rich.
Ideology aside, the main barriers to implementing this policy are surmountable. And the time is long past for this kind of innovation. Central banks are now trying to run twenty-first-century economies with a set of policy tools invented over a century ago. By relying too heavily on those tactics, they have ended up embracing policies with perverse consequences and poor payoffs. All it will take to change course is the courage, brains, and leadership to try something new.
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Well said. Over-hedge for calamity, and you find yourself hoping for calamity.
Those who have positioned themselves so that they can survive without the banking system will come out ahead after hyperinflation. If you are positioned so, even with massive debts today, you will come out ahead (of everybody else, not necessairly ahead of where you are today) should you survive. You'll have plenty of opportunity to pay debts off with currency that is rapidly becoming worthless.
Most people are not positioned to survive without the banking system, and are thus going to be in for a rude awakening.
Bring on the Helecopter drops, BITCHEZ!
Well...since I already stopped working in response to low interest rates (since I save 60% of my income and rates are negative, my time becomes worth more than savings) I guess I would spend it.
So you meant no, and then yes. Or is the que line just FUBARED as usual?
Yes pay off debt; but, no to PM's if they're handing out money, it's game over - buy food, supplies, guns, ammo - at least that is what we've been doing. Ready as much as we're going to be.
No, just buy PMs, then after the currency hyperinflates, use the PMs as 'other consideration' to pay off all your debts. Or just charge everything because the money is just going to go away along with the debt.
The beast feeds off debt. If you want to quicken the reckoning, you should eliminate all your debts and starve the banksters. This is also the far safer option.
If we hyperinflate, on the backside is still a massive population of people who will be cut off from life's essentials - food and water. This is NOT going to end like Weimar or Zimbabwe. This shit is global and society is pressed up against a whole host of constraints. This is more like the end of ancient Rome - getting taxed and robbed into fucking oblivion (akin to the soldiers of Rome looting the city for the pensions that were promised but not delivered).
Going all-in on PM's thinking that it is a going to be some sort of panecea is incorrect. Like Machoman said, diversification... hedging. Any way that you are tied to the system is another channel through which you will be raped. And if this really goes Mad Max, PM's won't mean shit.
PMs are part of a strategy. They are not THE strategy.
No, just buy PMs, then after the currency hyperinflates, use the PMs as 'other consideration' to pay off all your debts. Or just charge everything because the money is just going to go away along with the debt.
Why bother with the debt? It's all a bunch of BS. When the whole ugly system collapses into a pile of steaming crap, what are they gonna do? Call a collections agency? Get in line motherfucker.
Good luck with that. Unless you are willing to live under a bridge for a decade or so, this is a timing game. Sort of like outrunning a bear. You dont have to be faster than the bear - just faster than the next guy.
The failure of the system we live in is a process (we are in it now of course), not an event. Those with a one-dimensional strategy best hope they are spot on. Otherwise, the bear is going to get them.
They don't want to delay it, they need it because if they can't blame it for the economic implosion of our economy and the currency. People will blame the govt. and go after them.
The "transfers" would start in the East Hamptons and eventually work there way down to Main St.....for as long as any $$$ are left.
Co-opt us, corrupt us, and we 'join them' in their orgy. Cant criticise fractional reserve fiat ponzi currency tokens when you're accepting for free what's invented from nothing. Total disconnect from 'reality/reward for effort/productive value/honesty', served up to the 'useless eaters and bleaters' on the prison farm as a bribe to stay docile...no thanks.
Handing consumers cash OR handing consumers toilet paper?
Maybe they should start printing money on extra-soft paper.
You want stiff, rough paper. You need to toughen your asshole up, because you're gonna get assraped.
Optimist.
There is always a debt jubilee. ALWAYS.
This time is not different.
My $3 Million tax free is five years overdue.
So sorry, that was reserved for Hank tanks in the street.
I'm confused, I see inflation when I buy shit but sense that they fear deflation. Or maybe just want to cause hyperinflation. Weird, for now I'll just buy real things and keep debt low, can't go too wrong that way but can't make a fortune working hard and not using other people's money. Oh well, they don't put pockets in shrouds anyway.
They fear deflation. Inflation is required in our system by design. If you expect hyperinflation, and you can time it, it would be in your interests to take out as much debt as possible to purchase useful things. The problem is that you'll probably get the timing wrong.
Deflation is when banking contracts on itself. If a bond defaults, it rolls back to the lending multiple. If a $100M bond defaults, $1B has been lent against it...
Very long for an Onion piece.
Looks like they want to spread g(u)ilt around.
New York will not like this proposal because Manhattan was built on a TRICKLE DOWN, BANKS FIRST financial model where they shave hundreds of billions off the top in the debt induced money creation process.
Giving people cash directly eliminates the opportunity for the banking parasite to buy their $40 million NY & London "apartments." Or to buy their congressman.....so, I'm sure the notion will be destroyed.
This would be a boon to the banking sector, since the money is in WRITING the loans not SERVICING them. As soon as loans are made they are bundled off for "investors" to buy. A helicopter drop would immediately increase the now comatose ability to borrow for the vast majority of people.
It would work just like when people win the lottery. People will pay off debts, and the borrow even more because they are "rich" - a jolt of adrenalin to the animal spirits as it were.
Yep--might be the craziest thing I have ever read here. A few times I had to re-read lines to make sure i wasn't drunk already.
My only comment to all of this is an obligatory; "Gold, bitchez"
Goodness. With all that has been printed worldwide so far, we should have had massive hyperinflation everywhere and in everything. But we haven't. That is the hidden message most inflationist do not see.
"we should have had massive hyperinflation everywhere and in everything. But we haven't."
Just wait for the flood gates to break open. Bet you won't be shooting your mouth off then.
I guess the real 8-10% inflation rate doesnt register with him?
"I guess the real 8-10% inflation rate doesnt register with him?"
I guess Sessinpo doesn't go food shopping.
8-10%? You lucky fucks, food prices already 30%+ more than last year here in India
I paid $36 for a 8x4 sheet of sanded plywood the other day. Yeah right inflation is low. Puhleeze!
Beef prices are up more than 30% here; but I guess you folks don't eat much beef.
Inflation is high when the producer is not pumping just as much free money.
I'll take their fiat shit-paper...and I'll immediately convert it into phyzz PM's.
I doubt at that time, people or companies will not be parting with their Phyz for paper....
Which is why I'm stocking up NOW.
My new motto: Junk Silver Is Not Junk!
Boy you got that right. That'd make a good bumper sticker; except that the less people who understand it the better.
Central banks, such as the Fed, should hand consumers cash directly.
Does this mean I can drop on down to the local Fed Window and "borrow" a mere 10 billion at .5 %?
Stimulate me Janet, if you can... /s
'Insider's' such as JP Morgan et. al are clothing their nudity, suppressing PM prices, and covering their bent over and take it 'positions' they have ultimately created themselves...all at the same time.
Two quick thoughts
1. We all work are asses off for the crap they are printing in the trillions and now want to just hand out...(oh wait they do that already).
2. This could possibly be inflationary could it...you know just handing out money. Naaagh don't be silly.
Ok a third...
How do they know when to stop...I mean if this is such a great idea - why not just do it all the time...(Oh wait, they already do...)
Never mind...just keep stacking folks. This cannot end well with idiots like this running things.
They won't drop cash until they have shored up their positions with hard assets, if at all. What the origianl author is suggesting is not only dangerous, but is tantamount to financial heresy for wealthy citizens who are not properly hedged.
Someone gonna get got.
Its about time - they've been handing out banks free cash for years
So let me get this straight... cops are shooting people for stealing stuff to smoke weed with, the people then riot and start quasi race wars, then the government decides that because of debt these people cant afford to just buy the stuff to smoke their weed with so we are going to start helicopter dropping cash directly to these people which will inflate the price of weed while at the same time doing away with the peoples debts. The problem is, what happens when the riots get so bad that someone starts shooting down the helicopters?
did you miss the ZH article on the UN chopper in SoSudan?
that pretty much tells you what's going to happen.
http://www.zerohedge.com/news/2014-08-26/white-hawk-down-un-helicopter-s...
Perhaps the approved items list for EBT will be expanded to cover weed... ?
The answer is obvious. Instead of dropping cash, just drop weed instead. Everybody be jammin'.
End of the line guys... I've been waiting here for days!!!!!
"Even if households decided not to increase consumption but instead re-balanced their portfolios by using their extra cash to acquire real and financial assets...."
Who the fuck is this writen for? A cursory examination of Labor Department data reveals that over 50% of the country has a houshold income of less-than $25k...so they don't pay tax firstly...but, then it drags on to use terms like "Mo Omoney"...to beat the Clunks here over the head with the steady drum of "lazy black people on welfare"...
Give me a goddam break! Banksters steal TRILLIONS...YES, TRILLIONS...yet all that is written here is another "blacks gonna steal my crumbs" article meant to DISTRACT everyone from the REAL THIEVES....
AND ITS WORKING!!!!!!! FUCK!
George W. Bush did it in his term, just printed everybody a check. Caused a one-time bump, like cash for clunkers.
if they hadn't handed out Money a recession would have shown on radar, the blip bump up held off the bad news a few months.. which tells you exactly why they would try it now...
"Why the Hell not? It's working so well in Ferguson."
Reposted again....you can stop now, blacks are not gonna get your crumbs and trailer....
Hey look! Dukes of Hazard is on!
Cash is trash. Bobby will keep his Bitcoins.
LMAO fonestar, Rusty will keep on stacking. LOL
Fonefuck?? That u?
That's him.
I thought he was g0atfuker or something like that.
Tyler(s) periodically make him get a new handle.
He's a goatfuker alright; he just doesn't know it yet.
http://www.coindesk.com/bullion-dealer-amagi-metals-stop-accepting-fiat-...
Red Team...Blue Team...same league ownership.
The CFR and The Fed are brothers-in-arms.
https://archive.org/stream/CreatureFromJekyllIslandByG.Edward-G.EdwardGr...
"deflation is already returning... has anyone been watching oil/gas prices?" -- and this is a bad thing?
Fuck you.
i never said it was a bad thing. just pointing out the yr-yr drop in gas prices.
what's important is the policy/economic activity implications that follow.
"i never said it was a bad thing. just pointing out the yr-yr drop in gas prices."
Money supply isn't the only thing that affects prices. Supply and demand also matter.
Gas prices have not dropped a penny the last couple of months here in BC, Canada. Still $1.35 a litre ($5.40 a gallon). Been over $5 a gallon for a couple years now.
Deflation my ass....
"Supply and demand also matter." -- Correct, and with 7+ billion people (and growing)all competing for the energy and resources that make a better standard of living possible, demand has never been higher...
"demand has never been higher..."
Show me the production vs consumption graph. I'm willing to bet that production is at an all time high. While oil might be harder to get out of the ground, technology has kept up. With the ongoing global recession/depression, consumption is also probably flat, decreasing, or at best only increasing slightly relative to supply. Combine that with increasing alternative energies and improved energy utilization (energy efficient electronics, better power infrastructure, etc.). I wouldn't be surprised that gas prices fall DESPITE increase in money supply.
Paid $2.999 in South Carolina for gas three days ago - first time in a long time we've paid under $3. In Vancouver, BC we paid a shit-load more than that 8 weeks ago.
And ten years ago it was under $2.00 in South Carolina. So fucking what? Go ahead, watch how hard it becomes to actually take delivery should those prices return. I really don't think people understand how a currency collapse works and there probably aren't many people still alive to tell them.
"Go ahead, watch how hard it becomes to actually take delivery should those prices return"
that's the ticket.
this is where the fun starts; extrapolating outcomes from price/demand/supply dynamics.
who loses, who gains, how that p/l pushes up and across different sectors and policy circles.
"who runs bartertown?"
LoP - you always sound so angry. Careful, friend. You'll have a coronary. This shit will shake when it's time to shake. Gettin' ourselves all bent out of shape doesn't help you or me. If there is a conspiracy to collapse the currency, there's nothing you nor I can do about it. Lighten up. Even if every eff'n person in the world were aware of it - and who was causing it - there's nothing they can do about it. Nothing.
America alone still consumes 18 million barrels per day asshat. Alternative energies don't come fucking close as much of that oil goes into food production. So, unless all those people stop eating/consuming, the statement holds. And quite honestly, it really doesn't matter what any species "thinks" or "believes" as that which cannot be sustained, won't be, period.
The fact is that inflation is about 10% for just about anything else. Just because you don't see it in gas prices doesn't mean it doesn't exist. In fact, it supports my argument that it has more to do with supply and demand than money supply in this instance.
A consumption vs production graph would also have been more useful than calling me an asshat. 18 million barrels means nothing to me. Your missing the supply side of supply-demand. Alternative energies are not insignificant and I didn't even mention nat gas and coal. But this is all beside my point. Inflation is real and it is here.
Yes production has kept up but at a cost. It takes $90/b to break-even on Texas fracking I once heard. If prices get much lower, they will start shutting down.
That's not deflation as they define it. That's a serious drop in market demand.
The 6-8% drop in gas prices corresponds to a 6-8% drop in fuel economy in all my vehicles. Everything is tuned. I think they changed the formula.
I am not sure if that is a demand drop in gasoline because people are broke or they are trying to screw Putin by lowering oil prices.
No where to go, nothing to do. Hell the movies are so bad that they are not even driving to the theaters.....
Don't be silly, banks can't pay huge bonuses if cash is given directly to consumers. It must go to banks and let consumers have the ripple effect if any. It none, oh well, too bad.
What happened to the trillion dollar coin? Just send me one of those and we will call it even!!!
8>D
Well, ZH has been warning people for years. If you didn't listen then suck it! Daddy be gettin his new Escalade with rims in the hood.
Debt free money (money spent into existance) is not something the banks would ever stand for. They enjoy a great deal of power creating debt slaves out of people, corporations and countries through their credit based money schemes.
Things must be really, really bad for them to consider something like this. Think I will buy a couple ounces of gold today.
Capital is worthless as current levels of taxation and regulation. Add in licensing and insurance costs, absence of meaningful tort reform and capital is waaayyy under water.
"the same minds that created the problem are incapable of a meaningful solution"
Although that hasn't yet stopped them from trying to throw the peons and peasants another bone.
>>>>>"the same minds that created the problem are incapable of a meaningful solution"
Just feelers for buying time until ebola makes its way here.expect deflation. the ruling elite won't have inflation ruin their wealth
Wait until the election is over. Those gas prices are going right back up, probably higher than they've ever gone. They are gaming us, of course. Yellen's trying to save the Democrats. It won't work, just as it didn't work in 2006 and 2008 when Bernanke let inflation fall for the sake of Republicans in those election years. Obamacare is just getting started and it ain't stopping with Republicans taking over.
We will be RICH
Zimbabwe Dollah.
Don't worry, be happy.
this is why they should have made Wait What head of the Fed.
he would have set up a national lottery system in 2008 that would randomly pick Americans by SSN to win a substantial amount of money.
booyah!! all those Fed dollars are suddenly in circulation. problem solved... well at least 1 problem solved. the obvious destabilizing inflationary fiat ramifications aren't Wait What's problem, which is to say, the Fed's problem. /s
I also recommend those winners contact details and home address be published.
Does this mean Obama will pay my mortgage? Yippppy!
Miffed;-)
Actually this is the "slight" problem with this theory. "Housing" unlike "money" is not an abstract concept...so "giving money to Banks to bailout the mortgage issuer" did not save the housing market which is continuing to become for all intents and purposes "un-economic."
The ACTUAL housing market in the USA is the largest in the world...has not recovered since the collapse in 2008 and simply put policy makers are focused only on their "special programs" and not the recovery as a whole.
If housing doesn't recover then there is no recovery.
It's not intended to recover.
Much mo bettah, Missy.
Ole Body Odor gwain inflate yo mortgage away til you can pay heme off wit one silvah dallah!
Bet you have a few;)
I think I did at some point but I may have misplaced them. ;-)
Silly me. Sometimes I turn around and it's a whole new world!
Miffed;-)
Why not focus on fiscal policy to create jobs? Nevermind.
Tuesday funnies
As long as the cash you are given is equal to your net worth then it's a fair plan.
There is no way to justify it from a moral perspective. Nothing is free. As such, the drop will be "as efficient as possible" by "putting the money into the hands of those how will spend it" -> meaning EBT.
but, stocks are at record highs. if people want cash, all they have to do is sell stocks so they can spend all that free Fed cash. oh wait, the bottom 90% havent participated in the latest fed bubble. never mind.
A penny doubled every day after a little while is worth.... nothing!
You could not be more wrong my friend, or your greeners.
The power of compounding, daily?
Haaah....prepare to be boggled...
http://raivynnsroost.blogspot.in/2007/02/what-if-penny-was-doubled-every...
I'm sure he was being facetious, Vivek.
Actually, less than nothing. Since it costs more to make that penny than it is worth, to build that stack will require a substantial debt.
But then what happens when TPTB taketh thy cash away? FERGUSON ON A MASSIVE SCALE...
What happens when the prices increase faster than the cash? Or anything happens to the supply chain? Or society reaches a boiling point? Etc.
Same outcome.
And why DHS has lots of tanks, bullets, machine guns, etc.
This will become a politicans dream...to be able to hand out money to buy votes....it is socialists dream......I dont think I will be getting any..I am an old white guy..
You want MORE than what you're already getting from Big-OldFart and Big-OldFartHealthCare? Greedy bastard.
I'd start handing it out in the inner cities.
Disclamer: Long Nike
note to self: purple things and big ass rims.
and yet another day where u can overlay the phony paper price chart of Silver on consecutive days and find the same selling patterns at the same times.....
http://www.kitco.com/charts/livesilver.html
Does anybody listen to (or know what of) the "Council of Foreign Relations"?
Read The Creature from Jekyll Island if you want to learn a little bit about the CFR.
And finally- I'm gonna get mine, bitchez...
Yup...bend over.
The private sector consumer is broke .... no discretionary money at all. The only spending is from gubmint employees most of whom have continued to get raises of 3-5% per year despite the recession, gubmint entitlement peeples on EBT, and purchases on credit.
Small businesses are in death throws struggling to survive.
+100
Great post. Not to be a spelling cop prick but it is death throes.
Though it could be debt throws as poor sucker small business owners throw themself off the roof. Sad.
But, it's been the bankers who've been doing that?
To compensate for a mountain of debt bigger than Mount Everest they are going to infuse cash directly into the economy. They are paying the poor to pay themselves?
You tell me what percentage of people's income goes to their main dwelling mortgage today versus 30 years ago? The difference is staggering.
We drive the economy through DEBT it's BS.
Here is what needs to happen.
- Companies *not* employing locally for the production of product for sale in the economy are taxes 200% more than onshore companies.
- ALL TAXES ON INDIVIDUALS MUST BE ELIMINATED. The power to tax is the power to inhibit growth. Congratulations Genius Fuk Sticks Taxes are 6000% higher than they were 60 years ago, and the standard of living is dropping offset for increased automation and productivity.
- Borrowing must be cheap to 100% of a persons income and after that it must be HIGH. This forces people to LIMIT THEIR PERSONAL DEBT. Bringing back a healthy cash market.
If 90% of new car loans in the United States are currently high risk loans what does that tell you.
And don't forget everybody getting loot from Big-Ag, Big-MIC, Big-Road, Big-Water, Big-Airport, Big-Energy, Big-Ed, Big-House, Big-Fin, Big-OldFart, Big-OldFartHealthcare, Big-AntiDrug, & Big-PoliceState.
This is Merica, we only care about BIG-BIZ.
Yes, money please. I vote yes. Direct to my bank, direct to bullion. So easy.
The jokes just keep a comin'...........
I have an idea. Why don't we send these central bankers to jail for fraudulent money printing, burn whatever charter the Fed and the rest of them have and have the individual countries, and perhaps state, issue legal tender?
start a petition, write your congressman... oh, wait. none of that shit will ever work.
there's only one way your ideas come to pass, and they involve a little more effort and sacrifice than posting them on ZH.
jus' sayin'
Totally agree. Critical mass is what is needed to tip consciousness of the masses off the sofa and their teevee and into the reality of what has been transpiring. Some think it is hopeless but I don't. Just keep plugging away at 'em.
While i agree with everything you've said, and I would love to see some RICO bankster trials... we need to address that giving a group of people power over the trial (and how else would we do it, direct democracy in such a large country?) would almost certainly lead to abuse.
IMHO a better tack is to convince the TV-landers it is not in their best interest to consume mindlessly (no easier than trial convincing). This feeds the exact corp structure most complain about. All the big biz is in bed with the gov and banks, all one big scam... so why participate? I have 4 points I have been using to decent ends:
1. If money is power (fiat lets you call shots today), why do we spend it on such frivolous stuff (middle class crap)?
2. Disengage the thieves' economy on all non-essential functions.
3. Deploy your limited capital today on solutions for tomorrow that require no dollar inputs. (ex: a garden today costs a few bucks and some labor, but gives dollar-free fruit/veg tomorrow)
4. Spend your new-found free time with loved ones/pursue goals to improve your quality of life.
When companies start going bust, won't be able to hide the scam anymore and viola, masses awake.
"It has to get worse before it gets better".
I like my dough on pallets dropped from helicopters.
I nominate the fed for the Money Bucket Challenge.
What if a pallet of hundred dollar bills lands on your head? That happens to me all the time in Call of Duty.
They are doing this already. Go to any Wal Mart. Endless freebies for Obama voters and illegals. Sign and drive on any Chrysler and GM if you love Obama. Your credit card debt be done wiped out.
This utopian plan is chock full of so much defeasible logic that it can't possibly fail to be placed into action. And the authors obviously ghostwrite for The Onion. Salut.
this article is not current. In today's economy we would clearly have yellen lifting her skirt for the proverbial "golden shower of cash" to make it rain on us ho's.
Bring on hyperinflation...anything bt the golden shower of acid death!!!
RIPS
Thanks for killing my appetite when the wife is about to dish up.
When the game of Russian Roulette with a pistol is going too slow, there is only one thing to do: Increase the number of bullets...
Or switch pistols. 10 round, Single-stack, .45
The game will be over real quick.
Everybody becomes a billionaire!
But......wait.....who will do the work when nobody needs the money?
On a more serious note, where is the catch?
"On a more serious note, where is the catch?"
Seriously!?
Exactly. Visualize taking your gobs of FRNs to *any* other country, one that has watched in shocked horror as the US collectively and instantly devalued it's own currency in broad daylight. Our newfound wealth will buy a fraction of what our old poverty could afford, execpt for PMs, which will now be completely out of reach for all.
Problems solved!
The CFR is good people with the interest of the masses at heart. You can tell this by tracing their funding/salaries; it all comes from donations from little people like you and me. Right?
I know, printing more money means debasing the currency, but they've been speeding that up for decades for the benefit of the 0.1%.. So tell me what's the catch? And to make it more challenging, you have to answer without using the words "Weimar", "Zimbabwe", "Hyperinflation", "SDR" or "global currency"...
When you do it on the sly, to the benefit of a few, there's an option of having your friends in distant countries look the other way. You do the same for them. This can go on for decades.
When it reaches the point where it's a per-hearbeat cheat, in some insane attempt to jolt a dead economy back to life, the nakedness of the entire system becomes rapidly obvious to all. This maybe lasts months, if the collapse is orderly.
The US dollar is one gold-backed currency away from death.
This new gold-backed currency will be defended by the largest stockpile of thermonuclear weapons on the planet, effectively preventing the US banana republic regime from doing anything about it.
When the US dollar goes down the US goes down with it. Chaos and anarchy when food and gas double then triple then quadruple in price. If you have stores of food and/or gas you'll need a small army to protect it ...and hope it doesn't turn on you.
That's when Americans will figure out they were looted by their own government, quietly, unnoticed. But it will be too late to do anything about it amid chaos and anarchy. Revolution, take America back? Not a chance. Those with weapons will be guarding their home from roving gangs. Bedroom communites become battle grounds where the most brutal win, just like any 3rd world country. Call the cops? Good luck. They'll be defending their own homes.
I hope I'm not alive at that time, or have the opportunity to leave America before then.
Go where? Simple, where the new gold-backed themonuclear defended currency is.
Your kids get to pay later for your new flat screen tv today...
"Doin it for the kids."
"The Bank of England, the European Central Bank, and the Federal Reserve already own assets in excess of 20 percent of their countries’ GDPs, so there is no reason why they could not invest those assets in global equities on behalf of their citizens. After around 15 years, the funds could distribute their equity holdings to the lowest-earning 80 percent of taxpayers."
AHAHAHAHAAHA!
This is one of the most bullshit articles I've ever read. It makes Kuroda look like a genius.
Free money!!!! What could go wrong? Give every household a million dollars and capitalism is fixed. The work ethic will be re-established. LOL
Money is supposed to be a means of exhange for the value of labor. So by this logic, I can be given money with no commensurate expectation for the application of my labor.
That leads to the following conclusions: 1) My consumption becomes independent of my labor capacity; and 2) money, therefore, has lost its underlying purpose/value.
Brilliant idea, you f&^#*$ing PhD's. Quite a fantasy you are spinning there. Unfortunately, the idea is so appealing (by the way, when do we get to the part where the chicks are free?) that it will probably become the central campaign plank of both parties in the 2016 election.
there's more than one party????
;-)