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Helicopter Janet, Mario and Mark Cometh - "Central Banks Should Give Money Directly To The People"
“Central Banks Should Give Money Directly To The People” – Gold Bullish CFR Proposal
Helicopter Janet?
Last week, a very radical proposal appeared in the pages of the influential ‘Foreign Affairs’ magazine, the publication arm of the equally influential Council on Foreign Relations (CFR) think-tank based in New York.
An article “Print Less but Transfer More - Why Central Banks Should Give Money Directly to the People”, that has been picked up widely in the media argues that given that monetary stimulus measures such as quantitative easing and near zero central bank interest rates have failed to boost economic growth, a new radical monetary approach is needed.
That approach is to print currency and give the cash directly to consumers and households as required so as to remedy insufficient consumer spending and in order to prevent recessions.
The article is authored by Mark Blyth and Eric Lonergan. Blyth, originally from Scotland, is an economist at Brown University in Rhode Island. Lonergan, originally from Ireland, is a fund manager of global macro strategies at M&G Investments in London.
Although ‘Foreign Affairs’ publishes various sides of important debates, policy articles in ‘Foreign Affairs’ have tended to influence US economic and political policy over the years, so the ‘cash transfer proposal’ is worth watching.
Hoped For Benefits Of "Free Cash"
Blyth and Lonergan argue that the slow economic growth and low inflation rates being currently witnessed in Western developed economies call for more extreme government and policy maker approaches so as to get people spending again, thereby stimulating economic growth and encouraging inflation.
To them, deflation is a key threat that the unconventional low interest rates and quantitative easing has not managed to tackle. Therefore in their eyes this needs to be countered by directly making consumers spend more by actually handing over cash to them.
Blyth and Lonergan draw on Ben Bernanke and Milton Friedman to support their cash transfer argument and openly say that it is now “well past time” for policy makers in the US and also in other developed countries to try the helicopter cash drop approach.
Helicopter Mark?
In 1998, after Japan suffered a lost decade of growth, Ben Bernanke, a then university economist at Princeton, advocated that Japan provide direct cash transfers to consumers in order to encourage them to spend more.
Previously, Milton Friedman had viewed direct money transfers as analogous to dropping cash from helicopters. This would go on to create the famous expression of Helicopter Ben (Bernanke) dropping cash from a helicopter.
Blyth and Lonergan advocate direct cash transfers either to all households equally, or possibly just to the lowest 80% of households. They say that lower income households would use this cash in a variety of ways, either to repay consumer debt, or to spend and consume, or to save. If a certain cash sum, say $1000, was not seen to be effective, households could, in their view, be given more, for example $3000 or $4000.
Blyth and Lonergan say that it’s hard to measure the direct impact on consumer spending of instruments such as lower interest rates, but that the impact of direct cash transfers are more measurable.
In their view, inflation won’t be an issue since central banks can continue inflation targeting.
Real Risks Of “Free Cash”
However, in our view, there are a number of flaws with this proposal.
Direct cash transfers have a danger of putting consumers further into debt. If a cash transfer is not effective, and an even bigger transfer is then handed out by governments, this will create the danger of consumer dependency on the cash transfer mechanism.
Helicopter Mario?
The argument that the level of inflation created by cash transfers can be controlled is untested. Since this direct cash transfer approach has never been used, it is in uncharted territory and could lead to unanticipated inflation. How the measurement of direct cash transfers is more accurate than the measurement of the effect of low interest rates and quantitative easing is unclear.
With economies already facing record money supply growth from expanded central bank balance sheets, new cash transfers flowing into the global economy could lead to an out of control velocity of money and possible hyperinflation. How would this extra liquidity ever be drained from the system again?
This new cash transfer money would also be printed out of thin air, thus diluting the existing money supply and eroding its purchasing power. Since all fiat currency is merely debt anyway, the creation of new money to finance the direct cash transfers would add to the existing debt burden of already struggling nation states.
GoldCore Conclusion
In many austerity hit countries, there are is an increasing tax burden with very high income taxes, sales taxes and many stealth taxes.
Does it make sense for central banks to be printing money that will in many cases be used to pay taxes, stealth taxes or even pay down credit card, loan and even mortgage debt?
This measure will likely further worsen the debt to GDP ratios in many already indebted industrial nations. With interest rates set to rise in the coming months and years, giving free money to consumers may bankrupt already vulnerable states.
Would it not be more prudent to have debt write offs and debt forgiveness at sovereign level so that countries can lower the tax burden on suffering citizens? Rather than compounding the problem by increasing sovereign debt levels through giving out "free" cash to indebted consumers?
There is a real risk that this could end up being another ‘soft bail-out’ for banks as much of the cash would probably end up being used to pay down the huge debts incurred in recent years and would come full circle to banks in the form of debt repayments and governments in the form of taxes.
The real solution to the global debt crisis is not more debt in the form of “free currency” and increasing sovereign debt. The real solution remains to implement significant debt forgiveness for consumers and debt restructuring for institutions, banks and nations in a modern debt jubilee.
Were such an extreme scenario to be implemented and a further and deliberate debasement of currency, there is a real risk of significant inflation and stagflation. Even hyperinflation in a worst case scenario.
Alan Greenspan’s warning of “fiat money in extremis” becomes more real by the day. This underlines the vital importance of having an allocation to gold in a diversified portfolio.
Gold will maintain its purchasing power in the coming years, as it has always done throughout history.
by Ronan Manly, GoldCore Consultant. Editor Mark O’Byrne of GoldCore
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so does QE which made the rich richer and did little for Main Street..
At least this would help MS vs. the big banksters..
could include a caveat that half of it had to be used to pay down existing debt but that won't happen because the banksters need all that high interest from the poor on their over due accounts.
At this point the only logical outcome will be a deflationary cycle clearing a lot of existing debts. Anything else is still kicking the can.
"In 1998, after Japan suffered a lost decade of growth, Ben Bernanke, a then university economist at Princeton, advocated that Japan provide direct cash transfers to consumers in order to encourage them to spend more."
But Ben directed his cash transfers to the banks.
Central Banker's Party of the Century ( to Celebrate the forthcoming Bust)
Come one- Come all
Let's Party till Kingdom gone
This idea is not new just flawed. The only real difference between QE and even more "unconventional" money financing is that, with QE, the terms on which the money is created "are flexible and sensitive to inflationary pressures", whereas in the case of a helicopter drop, the terms are more open, both can cause distortions within a market.
Lord Turner who had been one of two leading contenders to succeed Sir Mervyn King as head of the BOE made comments in the past that might indicate what "still more innovative and unconventional" monetary policies might look like. The outgoing Financial Services Authority chief didn't spell it out, but in the past he has talked about the possibility of pure money financing of the deficit or the so-called "helicopter drop". More on this subject in the article below.
http://brucewilds.blogspot.com/2012/10/a-helicopter-drop-for-england.html
"It's not a matter of money of course. It's because the nation-state should be destroyed as the elementary mechanism required to protect the rights of the majority. Until then, the state will be used to distribute a minimum subvention to the armies of unemployed, so that the big banks and corporations not to be threatened by sudden and massive uncontrolled riots of totally desperate people."
http://failedevolution.blogspot.gr/2014/08/the-dominant-elite-ready-to-b...
" and could lead to unanticipated inflation"
Money creation is by definition inflation.
the classic defintion is too much money chasing too few goods
What is a paycheck for soldiers in the FSA? If that's not money for nothing, direct cash injection, what is?
Empirical evidence being what it is, it has been almost impossible to be turned down for SSD, extended unimployment ins and freedom cards.
The other end of the scale is even worse.
How about this as a problem: money drops the ultimate socialist wet dream.
Does this matter? People will still purchase with credit and then have to pay cc companies, etc. This adds one level of indirection.
Better to stay out of it and let prices fall.
Corporations recognize that they have become welfare-ized and need to be toughened up. This way they will have to compete for their welfare from the US taxpayers.
But the corporations will get their welfare, just via John Q taxpayer and his FSA brothers.
And the US tax payer will further spend themselves into oblivion
The larger issue is that the "stimulus" gets jammed up in the works. The Fed's balance sheet increased by 3 Trillion, but real GQP only went up 1.5 Trillion since the end of 2008. Once that money gets to the top, it mostly stays there. If you cut all "stimulus" and let prices fall, then at least purchasing power will increase. That will have a more lasting impact.
"Once that money gets to the top, it mostly stays there."
But it does get out into the world, evidense the stockmarket... No?
Title:
Helicopter Janet, Mario and Mark - "Central Banks Should Give Money Directly To The People"That's right.
Otherwise, these people will kill them.
This is called a jubilee. Wake up people.
The gov. pays off the loans. The banks are saved
Just one major problem. If all loans are paid down, liquidity goes to zero and Jubilee would quickly turn to mass carnage
May I please go to the FED window and borrow 10 billion at .5%?
FED Margarine... tastes like Butter.
Then loan it back to .gov for 2.34%
You nailed it. The authorities are acting primarily to prop up governments as well as the economy by saving the financial system. It is important to remember these authorities are politicians and bureaucrats that want increased power and influence, and guess what, they may have hit the jackpot.
Those in power have joined with the banks to create the "Financial-Political Complex" that promotes the current financial policy and supports banks that are "to big to fail". More on this unholy union in the article below.
http://brucewilds.blogspot.com/2012/10/the-financial-political-complex.h...
Is it not obvious at this point that there's a fundamental lack in understanding, of why and how financial systems comes into being in the first place. What its ultimate purpose is in a functional orderly and stable society and how fragile the strings are that bind that system. They are truly playing with fire -
Dr Werner discloses facts about money creation that are at the core of every modern economy. About how the creation of the essential money that is needed to sustain growth is founded on debt. This suits banks, of course. Governments have huge debts, to banks, and few people realise that it does not have to be like this. Taxes are needed for paying for decades of past interest on government borrowing. Banking is an extracting mechanism. It extracts resources from the economy, through interest payments and the taxation needed to cover the debt burden of the government. Why borrow from banks and pay interest when there is an alternative way of money creation and allocation? Governments could create the money and allocate it into circulation through its spending programmes.
http://www.youtube.com/watch?v=zIkk7AfYymg
Committee on Monetary and Economic Reform
http://www.comer.org/
screw bread and circuses.
cash, bitchez