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It's Official: The "Helicopter Money" Calls Have Begun
Towards the end of April, we discussed how QE has led to a global deflationary supply glut. This is a theme we’ve been building on for a while now and, as noted on Monday, it is perhaps nowhere more evident than among US oil producers. Here is how we have described the dynamic:
The premise is simple. By keeping rates artificially suppressed, the central banks of the world effectively make it impossible for the market to purge itself of inefficient actors and loss-making enterprises. As a result, otherwise insolvent companies are permitted to remain operational, contributing to oversupply and making it difficult for the market to reach equilibrium. The textbook example of this dynamic is the highly leveraged US shale complex which, by virtue of both artificially low borrowing costs and the Fed-driven hunt for yield, has retained access to capital markets in the midst of the oil slump and has thus continued to drill contributing to the very same price declines that put the entire space in jeopardy in the first place. Furthermore, those who have access to easy money overproduce but unfortunately, they do not witness a comparable increase in demand from those to whom the direct benefits of ultra accommodative policies do not immediately accrue.
Global demand, as we’ve seen, is in the doldrums. The evidence is everywhere. Goldman sees freight rates remaining subdued until at least 2020. BofAML notes that the slump in global trade of goods and services has extended into Q2. Perhaps most telling of all, the International Labor Organization blames lackluster global demand for subpar post-crisis employment trends, which in turn has shaved an estimated $3.7 trillion off global GDP since 2008.
Despite it all, the answer is always “not enough Keynes” (more cowbell) which is why we said the following more than a month ago (we also predicted this back in September of 2013):
For those wondering how this will play out, consider that sooner or later, in order to avoid liquidation and stave off severe disinflationary pressures, someone will have to call in "Helicopter Janet" and once the cash paradropping begins well, we'll see you in the Weimar Republic.
Sure enough, the semi-official helicopter cash drop call is here via Bloomberg View’s Clive Crook. Abandon all sound money faith ye who read on:
But QE isn't unconventional any longer. It mostly worked, the evidence suggests. The world avoided another Great Depression. Yet even in the U.S., this is a seriously sub-par recovery; growth in Europe and Japan has been worse still. Now imagine a big new financial shock. It's quite possible that all three economies would fall back into recession. What then?
We don’t like where this is going already, please don’t tell us more…
Sooner rather than later, attention therefore needs to turn to a new kind of unconventional monetary policy: helicopter money…
The idea is far from crazy. Lately, more economists have been advocating it, and they're right.
The logic is simple. If central banks need to expand demand -- and interest rates can't be cut any further -- let them send a check to every citizen. Much of this money would be spent, boosting demand just as Friedman said. Nobody, so far as I'm aware, is arguing that it wouldn't be effective. What, then, is the objection?
One concern is that if a central bank starts giving out money, it will create liabilities with no corresponding assets -- thus depleting its equity. Compare with QE: This also creates liabilities in the form of money, but the central bank gets assets (the securities it buys) in return.
Does it matter that the central bank's equity is reduced? No. Standard accounting terms lose their usual meanings when applied to central banks. Money isn't a liability in the ordinary sense. Nobody is owed and nothing ever has to be paid back. In the same way, a central bank needn't worry about losses, even though accounting "losses" might sometimes arise -- as they also could under QE, by the way. An entity that can create money can't ever go bust.
The real objection is political not economic. Sending out checks is a hybrid of monetary and fiscal policy -- public spending financed by pure money creation. That's why it would work. Politically, this is awkward…
This idea that monetary policy isn't political was never more than a useful fiction. Central banks can't avoid making choices with distributional, hence political, implications. The real case for central-bank independence isn't that monetary policy is non-political; it's that central banks are better than politicians at economic policy.
Today, persistently slow growth and the possibility of another recession call that view into question. Not because central banks have been incompetent or because politicians would do a better job by themselves -- plainly, neither is true -- but because the monetary-and-fiscal distinction no longer works. The useful fiction has become a harmful fiction.
It needs to be addressed. Independence for central banks only makes sense if they have the means to do the job they've been given. At the moment, they're dangerously under-equipped.
The first thing to note here is that the Fed can go broke, it just gets to use the central bank equivalent of a tax loss carryforward to extend-and-pretend.
More importantly, this is all a confidence game in the first place. That is, it's based on human perception and people's expectations. Once you undercut that confidence by doing things like dropping fiat currency out of a metaphorical helicopter, well, let's mix metaphors here and say that the genie is then out of the bottle.
At that juncture, incremental policy maneuvers designed to soak up excess liquidity cannot possibly hope to keep pace with the self-feeding expectations of a public which, while heretofore blissfully ignorant to the futility of QE by virtue of obfuscation on the part of officials ("leave the complicated stuff to us"), will now suddenly understand that the emperor is naked.
Put simply: if printing trillions has so far failed to stimulate global demand and restore robust economic growth, it may be time to admit that the printing press isn't the answer.
* * *
Or maybe not...
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Wealth redistribution happens a million times a day in a capitalist economy. Every time money changes hands, wealth is being redistributed.
So please stop using the term as a sort of dog whistle for the evil 'socialism'. It, like ALL the "isms", has it's faults, but wealth redistribution is NOT a hallmark of socialism.
Wealth MUST be constantly redistributed, or you don't have an economy, period. What we are arguing about is HOW to accomplish that redistribution.
"Wealth MUST be constantly redistributed, or you don't have an economy, period."
Absolutely. And the freedom to make life choices which don't impinge on the freedoms of others MUST be constantly protected, or you don't have an economy, or a proberly functioning society.
Period.
Of course, that's a given. All of the "isms" have their own methods of doing so, most have been horribly unsuccessful.
It's the political side of the equation which has proven to be the problem...Money does what money does, regardless of whatever political system you have. It behaves pretty much the same, within the constraints of its host economy.
But when phrases like "wealth redistribution" become colored by ideology it makes it harder to discuss how to rebalance the economy. If you just pull back and LOOK at things, with most of the wealth at the top, and the rest being fought over by everyone else and the global economy stagnating, it is OBVIOUS that you've got to do a little redistributing. The question is HOW?
I don't believe it should be taken. I DO believe that it should be strongly encouraged to do the rebalancing itself. Making it costly to hoard large amounts of wealth, while giving generous incentives to get that wealth out there and doing SOMETHING productive. And raising the capital gains tax...income should be taxed as income, regardless of the source. Why complicate things unnecessarily by making distinctions?
We need to lose the winner-take-all mentality. There's enough for most folks modest needs, while still providing the necessary "extra" that some insecure types require to feel above the rest of us. There is no need to sit by idly as things become so horribly unbalanced in the interest of "free markets". The markets are NOT free, and haven't been in awhile. Had they been, the wild imbalances would not have occurred. So, having fucked it up, we DO need to do a little remediating.
Wealth is distributed through commerce. It is redistributed through force of government from the productive to the nonproductive. No whistle needed.
Socialism is evil, it is the rule of the masses by an elite few very much like we have now. NO ism can save you and none are good for you.
Supply, demand...What came first, the chicken or the egg?
WHY do we have "two schools" of economic thought here? Don't these idiots realize that a functioning market requires BOTH?
To quote Hillary, "What DIFFERENCE does it make?" which comes first, since the party isn't starting until BOTH have arrived?
This argument between the sides is beyond stupid. In this argument, each is right, and both are wrong.
The economy is a little bit country, and a little bit rock and roll.
Or, like New Shimmer, it's both a floor wax AND a dessert topping!
Focusing all your efforts on one end of the economy is like having 4 flats and replacing the two front tires only. You're not going to get very far until you stop being such a cheap dick and spring for the other two tires.
I am waiting for more money and deflation. Why do we work if we can get rich by printing? I am fine with more money and cheaper price. Who isn't? What are these people complain about?
If the sheeple get restless...and the politicians...the socialist ones are close to an election..you can bet giving out free money will be addressed as a good idea...its a way to stay in power..and that is all that matters to a politician...
and people shouldn't be too worried of it happening more than twice as the third time it will be only bread, you know the SLAVE FOOD that only makes you FAT.
Moar!
"The logic is simple. If central banks need to expand demand -- and interest rates can't be cut any further -- let them send a check to every citizen. Much of this money would be spent, boosting demand just as Friedman said. Nobody, so far as I'm aware, is arguing that it wouldn't be effective. What, then, is the objection?"
If this was SUCH a good idea why are people working for the money AT ALL, you ignorent piece of s***! Might as well start using toilette paper or wooden sticks as payment. It seems that these idiots really don't care much about the amount of goods and services in circulation and more about how much fiat is out there. The moar the better! Are they THAT stupid? Where is the nuke which says: "targeting only stupid people" so we can get rid of these fuck-ups?
The poor and the rich already got their helicopter drop. Why not the middle class now?
Because let's be honest; these people don't really care about the poor or the middle class or they wouldn't have destroyed them in the first place. Or, they will drop freeload of cash on them and see how they fight over the scarcity of the goods and services that they are able to afford....for a short period of time...untill prices adjust themselves upwards and they have to dump more free cash to inflate the prices further. Maybe they'll do it for sports, just to see how desperate we become.
As long is money out of thin air is fucking up everything anyway, I want my share.
Big notes please. Something my bullion dealer would be happy with.
Just deposit the money into special 100:1 margin accounts at Etrade.
Jannet did say poor people need to buy assets this will give them a head start.
Clive Crook!!!!!
You can’t make this stuff up!
That is an admission that QE was not for the "people", but for the ones who caused the ongoing problem and put the burden on the backs of the working class.
"Central banks can't avoid making choices with distributional, hence political, implications."
Love that word: "distributional". Don't you mean: TAKES FROM ONE AND GIVES TO ANOTHER, DESTROYING INDIVIDUAL INITIATIVE IN THE PROCESS?
INDUSTRIAL OBIT - anagram for distributional.
One look at the helicopter approach (Japan, Europe) simply screams "you're only going to make things worse."
This is what policy makers demand when they know all their policies have failed.
Obamacare rates are about to go through the roof yet again.
Talk about the unaffordable care act. "Of, by and for the rich"....that's all this Adminstration has ever cared about.
Everything else has been nothing but a total scam.
I did see Bush/Clinton numbers are plunging. Vox Populii may have finally had it with these clowns as crime rates soar and people realize the "police state" has nothing to do with providing law and order to the American people at all ...and indeed seemingly the exact opposite.
Note they are running scared lol.... STOP SPENDING.
It won't work in Japan. The people will find those dropped bundles of notes and take them to the police lost and found department.
These calls for "helicopter money" are simply another attempt to reduce the effects of a symptom, without addressing the underlying disease. The disease is the insane so-called "free trade" agreements that have eviscerated our manufacturing base. Bring back tariffs, (yes, I said it, and I'll say it again: BRING BACK TARIFFS!) and watch our manufacturing base grow, watch companies hiring and training people to do productive jobs instead of doing useless "make work" nonsense, and watch our nation become strong again. Bring back tariffs, and restore the American middle class; or do nothing about the cancer known as "free trade" and watch as the patient slowly sickens and eventually dies.
Maybe bit simplistic. Global trade will collapse.
At least right now we enjoy the free ride due to dollar reserve status. Take that away and what are we left with?
No easy options :(
I agree. The "domestic content" laws worked well enough for cars, and the globe did not implode.
While we're at it, we need to drastically drop business and coporate taxes and give incentives for foregin business and capital to come here again. Businesses don't pay taxes anyway, they pass the cost onto consumers.
USA has the highest taxes for businesses in the world coupled with a government that punishes success. These are barriers to foreign companies trying to come here and compete against our entrenched crony elites. We need to plot a reverse course.
Being the US they will use Apache and Chinook and Blackwater to shoot the people going for the money
Please deposit my $30 Trillion in physical gold bullion in my back yard. I moved the lawn chairs and outdoor grill so that the helicopter pilot could just drop the gold bars onto the patio stones without hitting my marijuana plant or cactus. Much appreciated!
Gold worth $30 Trillion? No need to move lawn chairs. The thenth ounce of gold will in the mail.
Just a matter of time before the rush to get out of bankster worthless fiats.
The government needs some competition.
Some call it Black Market
I'm good with that
Who's helicopter is this?
It's not a helicopter. It's a chopper.
Who's chopper is this?
Fed's.
Who's Fed?
Fed's Dead, baby. Fed's dead.
Paydebt with it and watch them squirm. Most likely though it will be given to blacks only as reparations...
Where's helicopter Bernanke when you need him?
"The real objection is political not economic."
What kind of BS is that? I have an economic objection. How does creating money out of thin air and giving it to people who have added no value so they can spend it help? Ok, so I get some money and spend it on a one time basis. Are companies in a world with global overcapacity going to hire more people for a one time pop in demand? Cash for clunkers was helicopter money and the end result was that you destroyed cars which had value and caused prices in the used car market to spike.
So, yes, economically speaking, I object. None of this nonsense creates innovation and jobs. Those things happen in spite of all this nonsense.
Maybe instead of raising taxes and having the government take more from people actually working to make and do things, we should let people keep more of the value they created. Why doesn't that helicopter ever fly?
These economists must have been dropped on their heads as kids, they all seem to be in tooth fairies, magic and free lunches.
The only problem is, the "foolish" public has proven extraordinarily resilient at actually socking away and "Free money" they are given, to pay down debt. That, of course, will undermine this new "stimulus".... except Wal-Mart Workers, who will undoubtedly cash their checks at the checkout line, and head to the electronics aisle
The only problem is, the "foolish" public has proven extraordinarily resilient at actually socking away and "Free money" they are given, to pay down debt. That, of course, will undermine this new "stimulus".... except Wal-Mart Workers, who will undoubtedly cash their checks at the checkout line, and head to the electronics aisle
The problem is that people keep talking and thinking in terms of trillions.
Next QE should be 20 trillion per quarter.
and then we might expect us to defeat deflation.
Fed's Hyperinflation to counter deflation.
Eventually making the masses go hungry. Control the food and media and you control the people.
Fed's Hyperinflation to counter deflation, yeah, do it.
Eventually making the masses go hungry. Control the food and media and you control the people.
I'm giving away free money, and where is the Batman!
:)
https://www.youtube.com/watch?v=8hn-CTSKmeo
If the government-backed counterfeiting cartel, the banking system, are thieves (and they are) then it's elimination plus RESTITUTION are called for. Since the cartel has cheated nearly everyone, both debtors and non-debtors and even the banks themselves then a helicopter drop of new, interest-free, inexpensive fiat is appropiate.
it is a trap, to keep the fake economy going.
Get too dah choppah!!!!!!
From article:
“At that juncture, incremental policy maneuvers designed to soak up excess liquidity cannot possibly hope to keep pace with the self-feeding expectations of a public which, while heretofore blissfully ignorant to the futility of QE by virtue of obfuscation on the part of officials ("leave the complicated stuff to us"), will now suddenly understand that the emperor is naked.
Put simply: if printing trillions has so far failed to stimulate global demand and restore robust economic growth, it may be time to admit that the printing press isn't the answer.”
Washington takes its marching orders from Wall Street and Banks, AIPAC, and other special interests – especially including extraction industries (Oil).
“Leaving the complicated stuff to us.” means monetary policy only. TBTF private banks can only create new credit in exchange for a new debt instrument. The FED can swap existing debt instruments for general purchasing power i.e. Fed Keyboard Money. The FED cannot direct spend unless they have a mirror on their double entry ledger.
Simply put, ledger mechanics dictate monetary policy. Taxation i.e. fiscal policy is the purview of government. Ledger mechanics means that private bankers cannot create credit without having some sort of mirror, a debt instrument or an asset.
Monetary policy, under control of bankers, has subordinated government. They dare not try to take over fiscal policy, because their hypnosis is aimed to bribe and confuse Congress Critters. Leave the complicated stuff to us – we bankers, the keepers of credit and monetary policy have enough tools in our toolkit to solve all economic problems.
Monetary policy alone is not enough. The idea that credit monetary policy alone is BS. Also, spending only into the military in order to put purchasing power into the hands of people is also BS. It is one of the chief means of war. Everybody must work at making war material – it is not real smart.
Man needs to pull his head out of rectum if he wants to survive as a species. There damn well is a gap between our productive power and how we distribute money as wages. This is a huge glaring flaw in Finance Capitalism, and banker rent-seekers will not let go of their death grip on humanity. They will not admit to this flaw, as they enjoy their rental gains.
Money should be a public utility that people use, and it should at lowest cost, so we can then produce and live free. And, I’m not talking about public banks, where the government gets to hold debt instruments on society. That is concentration of pyramid power.
I’m talking about public money with private banks, which decentralizes money power. In this way, people hold debts and credits on each other one-to-one, which is completely in alignment with our evolutionary history. Having private credit means inserted between our personal credit/debt relations will continue to whipsaw man, and prevent civilization from its higher evolution.
Parasite monetarist creditors should not create their credit money to then control mankind through holding of debt instruments.
i guess the real question is who has the biggest net? all wealth distribution schemes are the same, somebody gets more, somebody gets leftovers. if you're a politician you want gratitude. if you're an economist you want the money to spread around. the unintended consequence of all this money dropping that people will hoarde it, and then money velocity goes negative, and that is a crisis. so they have to drop script, time dated money, gift cards to amazon. could be really good for the retailers.
a good while ago i started the Free Gasoline for Everybody Party. I was going to take the trillion we spent in Iraq, scrap the war, and buy everyone as much gasoline as they wanted. a trillion put into the hands of consumers would have lifted the economy like nobody's business. doesn't matter if it comes in free cash or subsidized bills, if uncle pays your rent you can spend the rent money.
the GOP plans to do this are usually cash payment, the Dems prefer gratitude, they want to buy your vote by ingratiating themselves, the Repubs just want to buy your vote. final answer the fed doesn't have authority to do this, and two things to remember
1 The Fed is independent
2 The Fed chief serves at the pleasure of the President
its nice having an independent agency that answers to you
The only way this would work is to hand out gift cards to buy what few remaining products are still 'Made in USA'. Otherwise, any handouts get spent on more Chinese iJunk -- which does help them make new islands even faster!
The Satanic crowd which rules US of A are insuring the nation's lapse into Haiti like conditions.
http://news.yahoo.com/exclusive-detainee-alleges-cia-sexual-abuse-torture-beyond-151253658.html
Until stuff that the CIA and other American human rights crime organizations does is not addressed and people made to atone for their criminal actions in all walks of government sponsored terrorism, the USA has no credibility, zero, zilch, none.
The only reason other countries are still following this joke that calls itself a super power is they are fooled into believing they will be safe, but they aren't.
More JUDEFETZEN!!!
If losses don't matter to a central bank, then why not have the Fed buy every citizen shares in some pooled SP500 or Russell 3000 investment and have the Fed do a share buy back program each month at higher and higher prices. Each citizen gets a monthly check and the Fed simply loans them the shares they just bought back from them at the beginning of next month. This month your SPY shares get you 2000, next month they buy at 210 and get you 2100 and so on into perpetuity.
The Fed purchased $85bn in Treasuries per month in 2013. Purchasing 10 SPY shares per month at 200 for 310mm citizens costs $62bn. They can buy 31mm long call options at a predetermined increase in strike price and boom, inflation as far as the eye can see. Sounds ridiculous, but if losses don't matter, why not?
Same old same old BS. These people are idiots. You can't force inflation when deflation IS what is needed. Deflation brings back consumption because $1 buys more shit and frees up other $$ to do/buy other things. But hey in a debt world upside down is up. more debt looks good where as in a deflationary world more debt bad, savings good.. But god ahem FED chairman fuck over ever person who saved and was ready for deflation (and still are btw). Fuck over the righteous good and hard, repeatedly for daring to not BELIEVE..
I maintaned during the 2008 crisis instead of giving $Ts to fucked up banks and companies the best thing for govt to do was to start making US energy self sufficient, go solar, wind, and the biggy geothermal, fund the shit like the moon project and when completed sell it off to private venture money and make a profit doing it. Hell I might even go for some Gen IV nuke plants in the interim. I mean come on folks $10B/Gen IV nuke plant to burn up nuclear waste while we are building the $1T superconducting electrical grid AND means to launch stuff into space another $1T or 2 USING those same superconductors and excess electrical energy from solar another $1T during the day etc. We can spend $1T/yr building great shit for our future. Instead these putz's drop $5T making sure the financial cancers get a good dose of sugar to grow more and do nothing for our future except fuck it up..
And that my fellow planetary citizens is what we have multiple CB bank cancers making their own sugar so they can grow even faster. Good news here is that the time frame for the death of the patient is accelerating forward.. Fortunately the war machine and programming media will convince everyone they need to give more to the CB cancers until the shooting begins it will all be prime time all the time and then into the camps when it's FEMA time ALL THE TIME.
One can tell just how stupid shit is just by what we put cameras on and talk about in the media now. Clear counter tops with thigh high skirts so instead of listening the droning masses can eye pussy on TV hoping to catch a glimpse or wonder what they need to start wearing to get a good job.. Nothing honey just get on your knees like everyone else..
"Furthermore, those who have access to easy money overproduce but unfortunately, they do not witness a comparable increase in demand from those to whom the direct benefits of ultra accommodative policies do not immediately accrue."
So demand is going to increase and suddenly it is Zimbabwe?
"Furthermore, those who have access to easy money overproduce but unfortunately, they do not witness a comparable increase in demand from those to whom the direct benefits of ultra accommodative policies do not immediately accrue."
So demand is going to increase and suddenly it is Zimbabwe?
"So demand is going to increase and suddenly it is Zimbabwe?" the answer is obvious... both US and Zimbabwe have African distators with African cabinets.
In the real world dropping paper money backed by 18Trillion dollars debt from the sky would be called littering but heh this aint kansas any more
Compared to Caitlan....that Kardashian is one ugly ass cunt....she looks more like a man anyway. Maybe they couild transplant Bru er I mean Caitlans dick on her,,,cut her tits off (too bad she donate to Bruce....and the whole situation would be complete.
Or maybe they could lower the interest rate on 1 trillion dollars of excess reserves the banks have at the Fed. That would force Fed funds below zero and prompt a little more loan activity by banks. No helicopter needed!
You have hit on something important. Future Fed monetary decisions will take the form of changes to the rate of interest it pays on excess reserves rather than "influencing" the rate at which banks lend federal funds to each other. The "price" of "federal funds," as reported in the financial press has remained fixed at 99.86 for a long time, reflecting this reality.
"Crook" definition:
informal a person who is dishonest or a criminal. adjectivebad, unpleasant, or unsatisfactory.
"At that juncture, incremental policy maneuvers designed to soak up excess liquidity cannot possibly hope to keep pace with the self-feeding expectations of a public which, while heretofore blissfully ignorant to the futility of QE by virtue of obfuscation on the part of officials, will now suddenly understand that the emperor is naked."
Sorry, but the "public" are not blissfully ignorant due to obfuscation of officials. Take a look at just how blissfully ignorant the general public are innately. It's beyond disgusting:
https://www.youtube.com/watch?v=NI7xxhp0rk8
Do you think that people would spend that money on stuff made in the USA thereby stimulating demand? I doubt it. It would be shipped off to China for more cheap stuff.
Please yield rates have been dropping since Ronald 6 Wilsion 6 Reagan 6 was installed in 1981.
The USA has been falling into a liquidity trap or black hole for 34 years...
The FED does not lower rates.
The net consumers of yield have been imploding the net producers of yield down towards the absolute 0 point to supply power to teh demand for power by the explosion of the net consumers up towards the absolute 1 point.
In 2008 the 1944 Bretton woods global trade systsem with the USA as the primry power supply of it...reached maximum potential and has been in a controlled collapse ever since.
It's game over...you all just do not know it...all that is being done to hide reality...Is why you all get to enjoy cherish the delusion you have a clue what is going on.
From the december 7th 1941 false flag of pearl harbor to the September 15, 2008 controlled demolition of Lehmans...
Was 66 years 9 months 1 week and 1 day
24389 days
29 x 29 x 29 = 24389
It's all mathmatical...
The FED is jus ta smaoke an mirrors show
http://hypertiger.blogspot.ca/2014/01/forget-privacy.html
Also trillions have not been printed.
The total credit market debt of the USA exponteially grew for 64 years...from 1944 to 2008...then stopped.
From 355 Billion to 52.8 Trillion dollars
Then began to implode for a year....then began growing again...but not like pre 2008...The US economy is short 20 Trillion dollars if the exponteial growth rate from 1944 to 2008 was sustained.
Any idea "economists" have lately been advocating and which is promoted by that statist rag Bloomberg is 100% certain to be complete hogwash. So it is with this one - it's beyond crazy.