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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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Sun, 08/30/2015 - 08:39 | 6486817 Secret Weapon
Secret Weapon's picture

Any Debt Jubilee will be a party by invitation only.  If you are not in the 1% you will not be invited. Period. They still plan on fucking the 99%.

Sun, 08/30/2015 - 10:38 | 6487067 wizteknet
wizteknet's picture

amen brother that's why the 1% is toast next

Sun, 08/30/2015 - 14:17 | 6487659 bid the soldier...
bid the soldiers shoot's picture

 

I went to a Debt Jubilee once.

But then I woke up.

Sun, 08/30/2015 - 04:33 | 6486638 Global Douche
Global Douche's picture

Is this the same Citibank who is reportedly naked-short 3 billion Oz silver due within 90 days? China has issues, but they can't receive all the blame here. In fact, if they have the gold and silver I expect, they will get their reserve currency status soon enough. I want to thank ShittyBank and their useful morons in high places for the excessively cheap silver price. A huge wealth transfer will take place from it, and those with the Phyzz will be in the driver's seat.

Jim Sinclair has for a long time expected QE to infinity. The only question was the timing, absolutely a fools game but guaranteed due to the legion of idiots in the District of Criminals.

Sun, 08/30/2015 - 05:13 | 6486667 Debugas
Debugas's picture

communism is coming to america - free money for everyone

Sun, 08/30/2015 - 05:16 | 6486668 xcehn
xcehn's picture

The global economy is now (obviously) in its final throes, signalling imminent collapse. When the establishment's cries to ban cash and flagrantly inflate fiat become a chorus of rank desperation, the only thing left for the serfs to ponder is raw survival. Be ready for sudden 'mad max' conditions now.

Sun, 08/30/2015 - 05:30 | 6486672 wizteknet
wizteknet's picture

They get what they ask fur, coming to a theater near u... Sorry they press the button.

http://www.youtube.com/watch?v=hRJFvtvTGEk

Sun, 08/30/2015 - 05:43 | 6486678 xcehn
xcehn's picture

He who panics first, panics best; China's mad dash for the life boats is the last 'word'.

Sun, 08/30/2015 - 05:46 | 6486682 wizteknet
Sun, 08/30/2015 - 05:39 | 6486675 Allen_H
Allen_H's picture

Something ineresting to read:

Brandon Smith

It is undeniable; the final collapse triggers are upon us, triggers alternative economists have been warning about since the initial implosion of 2008. In the years since the derivatives disaster, there has been no end to the absurd and ludicrous propaganda coming out of mainstream financial outlets and as the situation in markets becomes worse, the propaganda will only increase. This might seem counter-intuitive to many. You would think that the more obvious the economic collapse becomes, the more alternative analysts will be vindicated and the more awake and aware the average person will be. Not necessarily…

In fact, the mainstream spin machine is going into high speed the more negative data is exposed and absorbed into the markets. If you know your history, then you know that this is a common tactic by the establishment elite to string the public along with false hopes so that they do not prepare or take alternative measures while the system crumbles around their ears. At the onset of the Great Depression the same strategies were used. Consider if you’ve heard similar quotes to these in the mainstream news over the past couple months:

John Maynard Keynes in 1927: “We will not have any more crashes in our time.”

H.H. Simmons, president of the New York Stock Exchange, Jan. 12, 1928: “I cannot help but raise a dissenting voice to statements that we are living in a fool’s paradise, and that prosperity in this country must necessarily diminish and recede in the near future.”

Irving Fisher, leading U.S. economist, The New York Times, Sept. 5, 1929: “There may be a recession in stock prices, but not anything in the nature of a crash.” And on 17, 1929: “Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months.”

W. McNeel, market analyst, as quoted in the New York Herald Tribune, Oct. 30, 1929: “This is the time to buy stocks. This is the time to recall the words of the late J. P. Morgan… that any man who is bearish on America will go broke. Within a few days there is likely to be a bear panic rather than a bull panic. Many of the low prices as a result of this hysterical selling are not likely to be reached again in many years.”

The establishment has made every effort to hide the fundamentals from the public through far reaching misrepresentations of economic stats. However, the days of effective disinformation in terms of the financial system are coming to an end. As investors and the general public begin to absorb the reality that the global economy is indeed witnessing a vast crisis scenario and acknowledges real numbers over fraudulent numbers, the only recourse of central bankers and the governments they control is to convince the public that the crisis they are witnessing is not really a crisis. That is to say, the establishment will attempt to marginalize the collapse signals they can no longer hide as if such signals are of “minimal” importance.


 

Sun, 08/30/2015 - 05:50 | 6486686 wizteknet
wizteknet's picture

1% is scared finally u just wait.... until there really really scared

Sun, 08/30/2015 - 06:51 | 6486713 Allen_H
Allen_H's picture

On Thursday, Hungary recorded a new daily record for the number of migrants arriving from Serbia with some 3,241 refugees, including 698 children, in one day !

Read more: http://sputniknews.com/europe/20150830/1026354465.html#ixzz3kICS62D4

This is how the EU is being destroyed, we have also found out USSA is paying for all the transport, they are sending them here to the EU. Now tell me how USSA is not a terrorist country.


Sun, 08/30/2015 - 05:55 | 6486692 Monetas
Monetas's picture

The Resourceful Capitalist - Tip of the Day :  The next time your Mom buys you some new tennis shoes .... and leaves them for you .... at the top of the basement steps .... surprise her .... tweak the Silica Gel packets in the microwave for 20 seconds .... then put them in her salt shakers .... better than rice .... which is food .... and Algore will thank you ?

Sun, 08/30/2015 - 06:06 | 6486701 Monetas
Monetas's picture

Good news for China .... we farmed out our production to commie sweat shops .... bad news for China .... we farmed out our rascally market crashes .... the jokes on you, Mao ?

Sun, 08/30/2015 - 11:25 | 6487191 J Jason Djfmam
J Jason Djfmam's picture

This world is running out of chumps.

Sun, 08/30/2015 - 06:16 | 6486703 Monetas
Monetas's picture

Kim stripped his uncle of power .... he stripped him of his clothes .... he fed him alive to hungry dogs .... so, trivia question for all you budding socialists .... what is the largest live dog feed of condemned prisoners in recent Norko history .... warning : the eighty prisoners machine gunned at a packed stadium doesn´t count .... as they were dead .... when fed to the dogs ?

Sun, 08/30/2015 - 14:29 | 6487697 bid the soldier...
bid the soldiers shoot's picture

It's true.

You are an idiot.

Sun, 08/30/2015 - 06:32 | 6486717 TongueStun
TongueStun's picture

Wake me up when Americans start shooting Zionist jew bankster cartel scum...until then suck it up and deal with living in a third world country, you'll get to it, now pass the Chikungunya.....

Sun, 08/30/2015 - 06:55 | 6486737 finnzero
finnzero's picture

Don't need money. Just gimme the helicopter!

Sun, 08/30/2015 - 10:39 | 6487071 J Jason Djfmam
J Jason Djfmam's picture

And fully loaded Puff the Magic Dragon.

Sun, 08/30/2015 - 07:11 | 6486753 Peterus
Peterus's picture

Avert? That's such a strange way of saying "postpone".

Sun, 08/30/2015 - 11:22 | 6487184 J Jason Djfmam
J Jason Djfmam's picture

Avert as in send in another direction? Divert a better word?

Sun, 08/30/2015 - 07:19 | 6486762 GreatUncle
GreatUncle's picture

All economic trades are economically dependent on the poorest trades like sell enough loaves of bread at a profit you buy a ferrari.

Helicopter money will fail because those who can suck the money out of the economy benefit more and all we have seen through QE.

Go on hand me a million bucks and watch it flow through my hands back to those most able to collect and a zero sum game for the economy. Then you tell me I then owe this value so be best in fact too refuse it.

Ya end up where you started at best, load more people with debt, contract consumption more and depending on the current masked level of economic deflation you are enduring prices may or may not rise.

So you will end up with a shed load of more debt to support unless "all the 1% are giving back a free a load of money they took" to shrink but not close the wealth gap.

No debt hangoever so consumption does not contract but you might want to restrict how fast they can take it out of the trades at the lower end.

Another word for the 1%'s it's taxation in a world where efficiency is making it really difficult to allow you the life you have become accustomed too. It is that simple.

Sun, 08/30/2015 - 07:34 | 6486773 pupdog1
pupdog1's picture

It's too bad that the Tylers don't understand that an article filled with bold, italics, different color fonts, and underlines is all but impossible to read.

Sun, 08/30/2015 - 07:53 | 6486784 rsnoble
rsnoble's picture

Does 'everyone' include Buiter?  Only if the money doesn't start dropping.

Sun, 08/30/2015 - 08:23 | 6486807 buzzsaw99
buzzsaw99's picture

the "everyone" only includes his bosses and you know it

Goldmember: Look. My vinky was a key.

Nigel Powers: Only a bloody Dutchman...

Sun, 08/30/2015 - 08:23 | 6486803 buzzsaw99
buzzsaw99's picture

There's only two things I hate in this world. People who are intolerant of other people's cultures and the Dutch. [/Nigel Powers]

Sun, 08/30/2015 - 08:41 | 6486819 nah
nah's picture

It has to work

.

-Mark Zuckerberg

Sun, 08/30/2015 - 09:35 | 6486901 CHX
CHX's picture


It has worked for me, so it has to work again. 

.

-Mark Zuckerberg

Sun, 08/30/2015 - 09:45 | 6486926 Fahque Imuhnutjahb
Fahque Imuhnutjahb's picture

"It" being the Winklevoss boys?

Sun, 08/30/2015 - 09:29 | 6486884 StrawberryBlonde
StrawberryBlonde's picture

Thanks, Tyler...so, what "they" are saying is that QE hasn't worked & the world is going into a recession...why on earth would they have us believe that more QE would stop it? This is simply more evidence that without more Central Bank and government intervention, the markets are definitely NOT reflective of economic conditions and cannot function on their own...what a joke! Welcome to Alice in Wonderland!

Sun, 08/30/2015 - 09:46 | 6486918 bunnyswanson
bunnyswanson's picture

Largest army on earth is in the way.  The US gun holders.  QE and False Fags Galore, inch by inch, now with the UN promotingn ban on hand guns- How many women in this world are raped a day?

The World Health Organisation estimates that globally one woman in five will be thevictim of rape or attempted rape in her lifetime."

This is nonsensical considering the war apparatus in place.  Disarming is suicide.  The day the curtain goes up, every one with a weapoon who has looked into his future and sees there is none is going to go out with a bang in their quest for a fair trial.

Sun, 08/30/2015 - 10:51 | 6487104 22winmag
22winmag's picture

Truer words were never spoken.

 

I pity any domestic or foreign fighting force/police force that tries to disarm even a single state, let alone the whole nation.

 

The term "unsustainable losses" comes to mind. Just watch the battle scene in Red State and then multiply the dead .gov thugs by a few million if you are having trouble understanding "unsustainable losses".

Sun, 08/30/2015 - 22:18 | 6488925 bunnyswanson
bunnyswanson's picture

UN gun control - Veto proof https://www.youtube.com/watch?v=J-96yJiFddA (Dahboo - "aimed at stopping “small arms [and] light weapons” from crossing borders–something which cannot be done without the creation of an international registry."

Sun, 08/30/2015 - 09:32 | 6486891 Space Animatoltipap
Space Animatoltipap's picture

Buiter is simply another Dutch megalomaniac. btw, The degraded Dutch politicians have sold out their country to the fascists in Brussels and to the dark, medieval creatures of the islamic madness.

Sun, 08/30/2015 - 14:17 | 6487658 AlfredNeumann
AlfredNeumann's picture

ISIS is CIA/Mossad funded and controlled.   

Sun, 08/30/2015 - 09:43 | 6486917 Fahque Imuhnutjahb
Fahque Imuhnutjahb's picture

We've all heard the old saw "America gets a sniffle, and the world catches a cold." and "China catches a cold, and America catches chlamydia."

Long antibiotics.   Ag has antimicrobial properties.

Sun, 08/30/2015 - 10:41 | 6487075 J Jason Djfmam
J Jason Djfmam's picture

Bullets kill sick people.

Sun, 08/30/2015 - 10:45 | 6487093 22winmag
22winmag's picture

Fire disinfects them.

Sun, 08/30/2015 - 10:18 | 6486998 Chuck Knoblauch
Chuck Knoblauch's picture

Already at $1 trillion per month.

FED covering naked shorting of UST's.

Criminal QE already happening.

Sun, 08/30/2015 - 10:24 | 6487011 Atomizer
Atomizer's picture

Citigroup can play a video game called the Federator. Practice Quantitative Sleazing IV. 

http://projects.wsj.com/games/thefederator/

 

Sun, 08/30/2015 - 10:42 | 6487081 J Jason Djfmam
J Jason Djfmam's picture

A first person shooter with a money gun.

Sun, 08/30/2015 - 10:24 | 6487013 Atomizer
Atomizer's picture

;-)

Sun, 08/30/2015 - 10:43 | 6487082 22winmag
22winmag's picture

Shoot a helicopter's oil cooler and see how long she lasts.

Sun, 08/30/2015 - 10:55 | 6487114 JailBanksters
JailBanksters's picture

Sounds a lot like Free Money for the Banks, but everybody else has to work for it. Just how does this actually fix anything?.

It was Free Money that created the problem in the first place, and the great fix is more free money. It makes about as much cents as, to get out of debt, you need to get more debt to get out of.

Sun, 08/30/2015 - 11:01 | 6487131 Chuck Knoblauch
Chuck Knoblauch's picture

This onion has many criminal layers.

If you have to wait for an announcement to act, you're already late.

Sun, 08/30/2015 - 10:56 | 6487117 Dr_Snooz
Dr_Snooz's picture

Well, a "helicopter drop" of cash into the hands of average folks would be a real Keynesian solution instead of more banker theft. I mean, the global capital allocation system has been highjacked by the thieving banksters. Printed money never makes it to the real economy. Instead, it gets handed over to crooked banks who use it to patch up their shattered balance sheets and fund more derivative gamble malinvestments. If the people got the money, they would use it to buy real products and fund profitable ventures. It's nice to see Citi talking about real solutions. Yes, let's fire up the helicopters.

Sun, 08/30/2015 - 11:03 | 6487135 moneybots
moneybots's picture

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

 

Helicopter money cannot save the world, any more than it did in Venezuela or Zimbabwe.

Sun, 08/30/2015 - 11:11 | 6487156 moneybots
moneybots's picture

" 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"

 

But here is the problem with that- you wind up back where you started anyway, as well as worse off once the major blast of helicopter money is over, as it will then be an even bigger debt bubble.

Sun, 08/30/2015 - 11:20 | 6487177 moneybots
moneybots's picture

"Either way, it is hard to become very optimistic on global risk appetite until a solution is found to China’s evolving QT."

 

The solution is collapse.  No cycle is going to hit bottom, until there is one.  Math is an absolute.

Bernanke did not prevent deflation from happening here.  bernanke doubled down on it happening here.  Bernanke built a bigger bubble.  100% burst and deflate.  QE didn't change the laws of math.



Sun, 08/30/2015 - 11:24 | 6487189 J Jason Djfmam
J Jason Djfmam's picture

Oh, you can change the law, but the math will remain the same.

Sun, 08/30/2015 - 11:38 | 6487231 VW Nerd
VW Nerd's picture

As the corrupt money system dies, trust wanes.  Force must exert itself around the world and especially at home in the US.  It's coming.

Sun, 08/30/2015 - 12:01 | 6487309 I Write Code
I Write Code's picture

We just wish it was helicopter money, instead of a stream of money through bankster territory that mysteriously dries up before it reaches consumers.

Sun, 08/30/2015 - 12:08 | 6487327 the grateful un...
the grateful unemployed's picture

i think i know how we get out of this, Yellen buys Chinas US treasury bonds, China reflates its stock market using the proceeds. (since there are a few americans who benefit directly from reflating the Shanghai, thats a win almost as good as reflating the NYSE) she just added a trillion to the monetary base, but then she burns the bonds. (a bond fire)

now China is pretty much in the same predicament as they were, they are holding a medium of exchange that is fairly illliquid. illiquid because we wont sell them technology, especially military technology, and the united states has no manufacturing base, other than housing. they could buy NYSE stocks, but the laws are such that large amounts of capital crossing borders raises red flags.

the chinese have already bought up the (dare we say crashing) real estate market in America just as the Japanese banks a long time ago bought up commercial property only to see that value disappear. we  quietly erase the coupon on that trillion in bonds and the deficit magically falls. either way she holds the bonds and pays the interest to herself.

now the good part, the IMF issues SDR bonds and we begin the process of credit expansion all over again. not only do we use frational reserve banking for our dollar we also use it for SDR based on those dollars my god the wave of new credit will amaze you.

the good guys win

Sun, 08/30/2015 - 14:40 | 6487719 bid the soldier...
bid the soldiers shoot's picture

 

Wake up, grateful.

Time for breakfast, your favorite, pancakes.

Hurry up before they're all gone.

Sun, 08/30/2015 - 16:48 | 6488063 frankly scarlet
frankly scarlet's picture

a firing squad could save the situation, followed by either huge debt write downs and - or citizen dividends to pay down debt and increase demand. Adding some nice positive debt free money numbers to balance the bankers negative debt money numbers would also be a nice fit.

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