Citigroup Chief Economist Thinks Only "Helicopter Money" Can Save The World Now

Tyler Durden's picture




 

Having recently explained (in great detail) why QE4 (and 5, 6 & 7) were inevitable (despite the protestations of all central planners, except for perhaps Kocharlakota - who never met an economy he didn't want to throw free money at), we found it fascinating that no lessor purveyor of the status quo's view of the world - Citigroup's chief economist Willem Buiter - that a global recession is imminent and nothing but a major blast of fiscal spending financed by outright "helicopter" money from the central banks will avert the deepening crisis. Faced with China's 'Quantitative Tightening', the economist who proclaimed "gold is a 6000-year old bubble" and cash should be banned, concludes ominously, "everybody will be adversely affected."

China has bungled its attempt to slow the economy gently and is sliding into “imminent recession”, threatening to take the world with it over coming months, Citigroup has warned. As The Telegraph's Ambrose Evans-Pritchard reports, Willem Buiter, the bank’s chief economist, said the country needs a major blast of fiscal spending financed by outright "helicopter" money from the bank to avert a deepening crisis.

Speaking on a panel at the Council of Foreign Relations in New York, Mr Buiter said the dollar will “go through the roof” if the US Federal Reserve lifts interest rates this year, compounding the crisis for emerging markets.

 

"So why it matters is that the competence of the Chinese authorities as managers of the macro economy is really in question - the messing around with monetary policy, the hinting on doing things on the fiscal side through the policy banks. But I think the only thing that is likely to stop China from going into, I think, recession - which is, you know, 4 percent growth on the official data, the mendacious official data, for a year or so - is a large consumption-oriented fiscal stimulus, funded through the central government and preferably monetized by the People’s Bank of China.

 

Well, they’re not ready for that yet. Despite, I think, the economy crying out for it, the Chinese leadership is not ready for this.

 

So I think they will respond, but they will respond too late to avoid a recession, and which is likely to drag the global economy with it down to a global growth rate below 2 percent, which is my definition of a global recession. Not every country needs go into recession. The U.S. might well avoid it. But everybody will be adversely affected."

Or translated from 'economist' to English - a massive helicopter drop of cash (well 1s and 0s) into the inflating hands of Chinese soon-to-be-consumers is al lthat can the world from another recession... and The Chinese leadership may need to stare into the abyss before they actually pull the trigger. Just think of the pork prices?

 

 

Mr Buiter had some more to add on the idiocy of Chinese Equity markets. He said the stock market crash in Shanghai and Shenzhen...

...is a sideshow. Consumption effects, you know, wealth effects, minor. Almost no capex in China is funded through share issue. And so it is a symbol of the policy failure rather than intrinsically economically important.

 

China’s problems are excessive leverage in the corporate sector, in the local government sector, and the very fragile banking system, and shadow banking system. As Chen pointed out, it won’t be allowed to collapse because it is underwritten by the government, but it won’t be a source of great funding strength.

 

There is excess capacity and a pathetically low rate of return on capital expenditure, right? Invest 50 percent of GDP and get, even in the official data, 7 percent growth. The true data is probably something closer to 4 ½ percent or less. So it is an economy that, I think, is sliding into recession.

 

And what the stock market reminds us of, I think, especially this sequence of the government first cheerleading the stock market boom and bubble - because quite a few of the local pundits believed that this was a great way of deleveraging without paying for the corporate sector, to have a stock market bubble. And then, of course, the rather panicky and incompetent reaction in response.

 

So, once again, why it matters is that the competence of the Chinese authorities as managers of the macro economy is really in question.

*  *  *

So, it seems, all of a sudden - despite the permabulls, asset-gatherers, and commission-takers saying otherwise - China matters! As Bloomberg notes, China’s deepening struggles are starting to make a bigger dent in the global economic outlook.

“We’re seeing evidence that the slowdown is broader than expected” in China, saidMarie Diron, a London-based senior vice president at Moody’s and one of the report’s authors. “It’s long been clear that there’s a slowdown in the manufacturing and construction sector, but the service sector was more resilient. That’s still the case, but we’re seeing some signs of weakness in the labor market.”

 

“We continue to believe that the greatest risks to our growth forecasts remain to the downside,” Schofield wrote. Actual growth is “probably even lower” because of “likely mis-measurement in China’s official data,” he wrote.

*  *  *
Which, is exactly what we have been saying for the last 2 years as the rolling collapse of China's ponzi becomes ever more evident (and hidden by ever more manipulation)...

Here, for those curious, are links to previous discussions:

And so on and so forth.

In short, stabilizing the currency in the wake of the August 11 devaluation has precipitated the liquidation of more than $100 billion in USTs in the space of just two weeks, doubling the total sold during the first half of the year. 

In the end, the estimated size of the RMB carry trade could mean that before it’s all over, China will liquidate as much as $1 trillion in US paper, which, as we noted on Thursday evening, would effectively negate 60% of QE3 and put somewhere in the neighborhood of 200bps worth of upward pressure on 10Y yields. 

And don't forget, this is just China.

...

The potential for more China outflows is huge: set against 3.6trio of reserves (recorded as an “asset” in the international investment position data), China has around 2trillion of “non-sticky” liabilities including speculative carry trades, debt and equity inflows, deposits by and loans from foreigners that could be a source of outflows (chart 2). The bottom line is that markets may fear that QT has much more to go.

What could turn sentiment more positive? The first is other central banks coming in to fill the gap that the PBoC is leaving. China’s QT would need to be replaced by higher QE elsewhere, with the ECB and BoJ being the most notable candidates. The alternative would be for China’s capital outflows to stop or at least slow down. Perhaps a combination of aggressive PBoC easing and more confidence in the domestic economy would be sufficient, absent a sharp devaluation of the currency to a new stable. Either way, it is hard to become very optimistic on global risk appetite until a solution is found to China’s evolving QT.

*  *  *

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Sat, 08/29/2015 - 20:04 | 6485913 kliguy38
kliguy38's picture

I think I'll stick with the barbarous relic........

Sat, 08/29/2015 - 20:18 | 6485938 Publicus
Publicus's picture

Only Trump can save the world now.

Sat, 08/29/2015 - 20:31 | 6485969 max2205
max2205's picture

Pig up? Pig down? Pig out?

Sat, 08/29/2015 - 20:47 | 6485995 strannick
strannick's picture

Helicopter money for the banks.

Long helicopters

Sat, 08/29/2015 - 20:57 | 6486016 ebworthen
ebworthen's picture

Precisely. 

Helicopter money is the only thing that did, and can, save Citigroup.

And on the backs of regular working folks and future generations.  Amurika!

Sat, 08/29/2015 - 21:18 | 6486056 Pinto Currency
Pinto Currency's picture

 

 

Buiter: To save the currency you have to destroy the currency.

What a clown.

Sat, 08/29/2015 - 21:27 | 6486083 knukles
knukles's picture

Assholes.  Every last one of them, and all highly paid to fuck it up even more.
BTW, the original concept of "Helicopter money" was meant as a cash grant/gift to all citizenry so as to goose discretionary spending as opposed to Hank Paulson's generous free money gift to the bankers/Wall Street.  At least he didn't outright favor Goldman (cough cough, AIG in my throat, cough, sputter ... may I have a glass of Dom Periginon, please, cough)

Sat, 08/29/2015 - 21:45 | 6486142 Pinto Currency
Pinto Currency's picture

 

 

Monetary inflation has many negative impacts and harms all in the end.

Might as well give out  poisoned candies.

Sat, 08/29/2015 - 22:54 | 6486275 Occident Mortal
Occident Mortal's picture

Why are people so intolerant of recessions these days?

Just let it happen. Stop fighting the business cycle.

Sat, 08/29/2015 - 23:30 | 6486330 Save_America1st
Save_America1st's picture

FINE BY ME!!!  HELO-DROP ME 10 OR 12 DUFFLE BAGS FULL OF FRESHLY PRINTED HUNDOS, YOU FUCKING SCUMBAGS!!!  That's nothing to you fags, right?  Drop me 100,000 bucks so I can keep scooping up this cheap phyzz.  What do you fucking psychos care about 100 grand printed out of thin air or printed on a bunch of colored paper????  That's all I need....that's all I'm askin' for, you fucking shitbags.  FUCK YOU!

I will immediately trade it all in for every single fucking ounce of physical silver Buffalos and/or Eagles or any other silver I can get my hands on, motherfuckers.

Howz about trickling that kinda economics down on Main Street, you fucking scumbags?????

Fuck off.

Sat, 08/29/2015 - 23:32 | 6486371 Never One Roach
Never One Roach's picture

I agree with above the money only goes to Wall Street, Bankers and DC politicans and the FSA. Very little of the QEs actually wound up in the hands of the Middle Class ... only the losses are shoved down the Middle Class throats, what's left of them anyway.

Sat, 08/29/2015 - 23:42 | 6486390 SafelyGraze
SafelyGraze's picture

what is *not* on the table is, is "default" and/or "debt forgiveness"

we do not discuss such things

or if we do, we might call them "quantitative re-surfacing" 

"quantitative re-obligating"

re-obligationeering

quantitative nullification

debt de-listing

also, we do not discuss dollar revaluation, for which a term already exists

hugs,
gideon gono

 

Sun, 08/30/2015 - 01:22 | 6486510 Marco
Marco's picture

"Japan's lost decades" were only lost from a financial paper point of view.

In the mean time they had one of the most competetive economies in the world through all those decades and one of the highest living standards in the world. From a man on the street point of view, they did fine.

Sun, 08/30/2015 - 04:52 | 6486654 Seer
Seer's picture

Yeah, in the micro it "worked."  The macro shows that it only "worked" because everyone was blowing bubbles, bubbles that kept the Japanese factories cranking away...  And then Korea and China ramped up.  Meanwhile Japan has shit for resources; and, their demographics are looking pretty shaky for the future.

Yeah, they "did fine," until they didn't...

Sun, 08/30/2015 - 08:06 | 6486794 J S Bach
J S Bach's picture

"...nothing but a major blast of fiscal spending financed by outright "helicopter" money from the central banks will avert the deepening crisis."

 

Nothing can "avert" the coming currency collapse.  All money printing will do is prolong it and make it more severe and painful.  Of course, there isn't a single person in power today that has the maturity and will to suggest real solutions and thus, everyone will suffer while the criminals responsible will most likely get away with it yet again.

Sun, 08/30/2015 - 02:02 | 6486538 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

They'll come up with something completely opaque like "Asset Recovery Program (ARP) or "Bi-Lateral Undervalued Reserves Program" (BURP)

TARP originally was real helicopter money until Paulsen stole it:

http://dailybail.com/home/the-hammer-gets-hit-by-a-tree.html

 

Sun, 08/30/2015 - 02:38 | 6486563 MontgomeryScott
MontgomeryScott's picture

You've gotten the wrong attitude, OTPBD(H).

'Obi-Wan Bernake; YOU are our ONLY HOPE!'.

SHORT version:

https://www.youtube.com/watch?v=xIFJLMyUwrg

LONG version:

https://www.youtube.com/watch?v=pUaxXsqGeFI

OBI-WAN YELLEN, YOU are our ONLY HOPE!

Sun, 08/30/2015 - 01:27 | 6486512 Marco
Marco's picture

Nukes mostly.

Can't really thin the herd with a couple wars any more, it will go hot.

Sun, 08/30/2015 - 03:39 | 6486601 Farqued Up
Farqued Up's picture

It's strange that business cycles coincide with election cycles. At least they once did, now they are perpetual. Why is that?

Sun, 08/30/2015 - 18:25 | 6488326 All Risk No Reward
All Risk No Reward's picture

It is not a natural business cycle. It is a weapons of mass debt implosion that is coming due - a debt collapse that will surpass the Great Depression in magnitude.

The definition of a chump is anyone who thought Alan Greenspan ever meant to helicopter money to ordinary people.

Geez. "Kick another field goal, Charlie Brown," Lucy.

Sun, 08/30/2015 - 12:37 | 6487419 slimycorporated...
slimycorporatedickhead's picture

The solution is for citizens to no longer accept dollars. Everyone wants the solution to come from the top, but the people at the top are the ones that are causing the problem.

Sat, 08/29/2015 - 21:27 | 6486082 cheeseheader
cheeseheader's picture

Willy needs an apple atop his head, and an archer with a bow not quite sighted-in aiming at him.

Sun, 08/30/2015 - 02:37 | 6486559 Bush Baby
Bush Baby's picture

If your gonna drop , at least drop it to the consumer

Sun, 08/30/2015 - 00:23 | 6486454 TheAntiProgressive
TheAntiProgressive's picture

Is it possible to shoot them down or hack them?

Sun, 08/30/2015 - 03:15 | 6486571 MontgomeryScott
MontgomeryScott's picture

DAMNIT!

 

You have to be more SPECIFIC when posing your question (one question at a time, PLEASE).

'Is it possible to shoot them down?'

Of COURSE it is, but it requires a considerable loss of resources.

'Is it possible to HACK them?'

PERHAPS this is the 'better way'. 'Ashley Madison' and 'Hillary' are leading examples of the assymetric strategy that you might espouse.

Sincerely,

OPSEC 1 ('Anonymous')

WE CANNOT FORGET, AND WE DO NOT FORGIVE.

EVER.

YOU SHOULD EXPECT 'US'.

BIO:

"I am a nobody trying to simple survive wondering how and when and why to preserve capital. I love reading this site. The insite is spectacular and spot on. Thank you for providing such a forward thinking service to us nobodies that we might survive the coming storm. I am not real big on politicians of any flavor but do revere the founders whose vision started us, this country in the right direction. I am a big supporter of freedom and liberty and the Constitution."

 

Not bad. NOT BAD, AT ALL...

Sat, 08/29/2015 - 21:23 | 6486074 Vlad the Inhaler
Vlad the Inhaler's picture

Fascism already failed.

Sun, 08/30/2015 - 04:11 | 6486622 HowdyDoody
HowdyDoody's picture

Insufficient Fascism. Try harder.

Sun, 08/30/2015 - 07:30 | 6486769 overmedicatedun...
overmedicatedundersexed's picture

OT, or not? new credit card offers 0% for 12 months then get this interest rate of 25%..tylers the cost of borrowing for us taxunits, vs prime and zirp at the discount window could make a good thread...in this crazy world BK banks & co's get the best interest rate on loans..nuthing in the finance press.

Sat, 08/29/2015 - 22:27 | 6486225 roddy6667
roddy6667's picture

The lemmings beg for a leader. He will just lead them off a different cliff.

Sun, 08/30/2015 - 05:33 | 6486674 Zero Point
Zero Point's picture

Only Trump can save the world? Lol, holy fuck.

What the fuck is wrong with people? Are assholes the best sheep can hope for as shepherds?

I vote we just execute anyone who wants to be leader, until no-one sticks their hand up anymore.

Sun, 08/30/2015 - 10:26 | 6487022 J Jason Djfmam
J Jason Djfmam's picture

Only Trump can fuck things up less than Hitlarry.

Sun, 08/30/2015 - 02:33 | 6486557 TripsTrading
TripsTrading's picture

Hi all,

My name is Edwin and I started my own website a year ago, specialized in Technical and Cyclical Analysis, see www.TripsTrading.com. 

I started this website mainly out of dissatisfaction with all the talking heads out there, to help the retail investor and hopefully, in time, to make it my dayjob (now, I'm still a teacher, also a great job).

I have spend the last ten years developing my strategy and I can tell you, it works (YTD 159%, Q1 44%, Q2 42% return). 

If you would like to try it out, you can now do it for free, the 1st month. After that, I only ask $15 a month to compensate for my time and information. 

Take a look at my site and let me know if you have questions. And please don't react negative to this post, there's enough trouble out there that adds no value. 

Enjoy the day! 

Sun, 08/30/2015 - 04:03 | 6486619 wizteknet
wizteknet's picture

Oh yeah? lol

Sun, 08/30/2015 - 08:28 | 6486808 bentaxle
bentaxle's picture

Hi, Asshole!

Sun, 08/30/2015 - 06:52 | 6486734 doctor10
doctor10's picture

NOTHING wrong in the USA today that couldn't be fixed with a few more William McKinley's, Grover Cleveland's, James Madison's and Salmon P.Chase's floating around. And I mean NOTHING

Sun, 08/30/2015 - 07:36 | 6486775 MilwaukeeMark
MilwaukeeMark's picture

I'm going to put diamonds in bandaid cans and run around all day asking people "is it safe?"

Sun, 08/30/2015 - 09:35 | 6486896 Perimetr
Perimetr's picture

The hybrid war on China has an economic nuclear backfire

 

Apparently someone at Langley forgot that China could dump $2 trillion in Treasuries . . .

Sun, 08/30/2015 - 10:05 | 6486966 glenlloyd
glenlloyd's picture

Yes, but aren't they now calling cash a barbarous relic too?

Sat, 08/29/2015 - 20:13 | 6485929 chistletoe
chistletoe's picture

QE did not "work" because it only gave money to rich people.

 

If you REALLY want to give inflation a boost, hyou must give money to the common people.

Tax cuts, tax credits, infrastructure projects, etc etc etc.....and outright handouts.

Sat, 08/29/2015 - 20:25 | 6485956 NoDebt
NoDebt's picture

Well, THAT'S not going to happen anytime soon.  Much easier to boost governmental spending into the stratoshphere, run up a huge deficit and have the central bank buy up all the paper debt that generates.

That's really what's going on here.  The private sector's been flat on it's back for years.  So you fill the growth hole with government spending to keep GDP at least flat-ish and have your own central bank fill the debt hole with printed money.  It's a nearly closed-loop system that generates very little (if any) inflation. 

This all works beautifully, of course, until you realize that the side-effect of all this is to further squeeze out the private sector with every printed dollar.  Additionally, governments are well known for being terrible allocators of capital.  Their spending doesn't generate GROWTH like private sector spending does.  Productivity and GDP growth flatlines as the deficits and debts continue to spiral upward.  It's a vicious cycle.  

And Japan's been doing it for decades.

 

Sat, 08/29/2015 - 20:29 | 6485960 Publicus
Publicus's picture

Print money to fund jobs/startups, it really is that simple. You can even selectively target areas to increase supply via money printing.

 

Sat, 08/29/2015 - 20:43 | 6485987 Miggy
Miggy's picture

You are right of course. But you have missed the aspirations of those that pull the strings. Power is the end game not just wealth.

Sat, 08/29/2015 - 22:31 | 6486233 roddy6667
roddy6667's picture

There are very few areas where a company can start up, hire workers, and make a profit. America is too expensive. The country is much like the guy who has so much debt that he has to make a six figure income to have a $25,000 lifestyle.

Sun, 08/30/2015 - 00:16 | 6486442 FreeMoney
FreeMoney's picture

Start up is expensive because of all the prior printing has inflated the value of hard assets like property, plant and equipment.

What we should really do is stop printing, balance our government budgets, and allow failure.  This would bring reality to our markets and prices would be discovered based on merit rather than politics.

Without question, many who are enjoying life now as wealth is redistributed politically would suffer.

I am tired of carrying them.

Sun, 08/30/2015 - 09:44 | 6486922 jerry_theking_lawler
jerry_theking_lawler's picture

FM,

That is just crazy talk. You will never make it on Wall Street, in the .fed, or .gov talking nonsense like that. Everyone wins. There is no failure, no 'deflation', nope, it is only moar, moar, moar printing which leads to moar, moar, moar excesses.

Now report to your local FEMA camp relocation center for immediate Keynesian training.

Sun, 08/30/2015 - 18:28 | 6488331 All Risk No Reward
All Risk No Reward's picture

Don't worry, they will shut down Main Street so that they can bankrupt it and buy it up for pennies on the dollar with their trillions in stolen loot.

Sun, 08/30/2015 - 03:23 | 6486588 MontgomeryScott
MontgomeryScott's picture

PUBLICUS:

"Print money to fund jobs/startups, it really is that simple. You can even selectively target areas to increase supply via money printing."

Thy name is 'SOETORO'!

Sincerely,

Rahm Ezikiel Emmanual, MAYOR

Sun, 08/30/2015 - 04:56 | 6486655 Seer
Seer's picture

How about stopping this meddling altogether?

I once argued that people ought to stop lobbying for more funds for "alternative energy" and instead lobby to get rid of the existing subsidies to "conventional energy!"  Chase tail, get dizzy; chase tail, get dizzy...

Do NOT follow this link or you will be banned from the site!