It Begins: Australia's Largest Investment Bank Just Said "Helicopter Money" Is 12-18 Months Away

Tyler Durden's picture

Just over two years ago, when the world was deciding who would be Bernanke Fed Chair replacement, Larry Summers or Janet Yellen (how ironic that Larry Summers did not get the nod just because a bunch of progressive economists thought he would not be dovish enough) we wrote about a different problem: with the end of QE3 upcoming and with the inevitable failure of the economy to reignite (again), we warned that there remains one option after (when not if) QE fails to stimulate growth: helicopter money.

While QE may be ending, it certainly does not mean that the Fed is halting its effort to "boost" the economy. In fact... the end of QE may well be simply a redirection, whereby the broken monetary pathway, one which uses banks as intermediaries to stimulate inflation (supposedly a failure according to the economist mainstream), i.e., "second-round effects", is bypassed entirely and replaced with Plan Z, aka "Helicopter Money" mentioned previously as an all too real monetary policy option by none other than Milton Friedman and one Ben Bernanke. This is also known as the nuclear option.

Today, one day after the Fed according to some finally lost its credibility, none other than Australia's largest investment bank, Macquarie, just made the case that helicopter money is not only coming, but has a "very high" probability of commencing its monetary paradrops over the next 12-18 months.

Time for a policy U-turn? Back to the future: British Leyland

 

From conventional QEs to more unorthodox policies…

 

As discussed (here and here), we do not believe that investors are likely to benefit from acceleration in growth rates, trade or liquidity and indeed on the contrary, negative feedback loops from EMs to DMs imply that neither would be able to support global growth. Secular stagnation is the key explanatory variable (here). The deflationary pressures from overleveraging, overcapacity and technology shifts can be either allowed to work through economies or public sector needs to continue resisting via expansionary policies.

 

Since ’08, monetary policies were doing most of the lifting with limited participation by fiscal authorities (bar China). In other words, in the absence of either private or public sectors driving higher velocity of money, it was CBs that were supplying incremental liquidity to preclude contraction of nominal GDP and avoid stronger deflationary pressures. However, marginal utility of incremental injections has been declining (witness much lower impact of recent ECB’s QE and increase in BoJ accommodation since Dec ’14).

 

Part of the reason for monetary stimulus fading is that supply of US$ remains low. Global economy continues to reside on a de-facto US$ standard and current incremental supply is almost non-existent (depending on definition growing at +2%/-1% clip vs. average since ‘01 of ~15%). In other words, due to lack of recovery in the US velocity of money and lack of QEs, global economy is not getting enough US$ to continue leveraging.

 

…as efficacy of conventional monetary QE is questioned

 

At the same time efficacy of continuing with conventional QE policies is being challenged and not just by independent observes but also ‘insiders’ (such as recent SF Fed paper). As velocity of money globally continues to fall, conventional QEs have to become exponentially larger, as marginal benefit declines. If public sector is not prepared to step aside, what other measures can be introduced to support nominal GDP and avoid deflation?

 

There are several policies that could be and probably would be considered over the next 12-18 months. If private sector lacks confidence and visibility to raise velocity of money, then (arguably) public sector could. In other words, instead of acting via bond markets and banking sector, why shouldn’t public sector bypass markets altogether and inject stimulus directly into the ‘blood stream’? Whilst it might or might not be called QE, it would have a much stronger impact and unlike the last seven years, the recovery could actually mimic a conventional business cycle and investors would soon start discussing multiplier effects and positioning in areas of greatest investment.

 

British Leyland failed, but it might work at least for a while

 

British Leyland (formed from nationalized British car companies in the late ’60s) destroyed its automotive industry but for a time it provided employment and investment. CBs directly monetizing Government spending and funding projects would do the same. Whilst ultimately it would lead to stagflation (UK, 70s) or deflation (China, today), it could provide strong initial boost to generate impression of recovery and sustainable business cycle. It could also significantly shift global terms of trade (to the benefit of commodity producers) and cause a period of underperformance by our ‘Quality & Stability’ portfolio and improve performance of ‘Anti-Quality’ screen. What is probability of the above policy shift? Low over next six months; very high over the longer term.

What's most disturbing about the above assessment is that Macquarie realizes this last ditch attempt to preserve the status quo will fail, but will - if nothing else - buy another 12-18 months.

So is that the event horizon countdown: 1-2 years... and then?

And just like last week's Daiwa report broke the seal on unprecedented economic bearishness (Citi promptly made a global recession its 2016 base case) will the Macquarie report become the benchmark which the other penguins will ape as suddenly calls to bypass the banks become the norm and suddenly every "authority" on the topic, which so vehemently advocated for QE, admits it never worked from day one, and instead recommends that the only option left to save the world is the "nuclear" one?

Which, incidentally, is precisely what we said would be the endgame on March 18, 2009 - the day the Fed announced the full-blown first QE1.

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ABG LINE's picture

Thanks, Yellen.

OldPhart's picture

This was rooted by Bernanke, but planted by Congress over the last forty years.

OC Sure's picture

 

Money comes from helicopters like it comes from tinfoil hats.

mvsjcl's picture

"...the recovery could actually mimic a conventional business cycle..."

 

Damn! These people scare me!

tarsubil's picture

I have been thinking it is a given that Americans will receive a check in the mail from the government in the next 2 years.

Chase sent me an offer for a card, 0% for 15 months, $100 for spending $500, another $25 bonus and 5% cash back on Amazon. It almost feels like the banks are ahead of the curve. 

freewolf7's picture

Central Banks: Sure, throw them a bone.

Fuck you. Death to the Central Banks.

Usurious's picture

ask not what your BANKSTER can do for you.......ask what you can do for your BANKSTER

Stuck on Zero's picture

A traditional way to dump money into the economy was for the bank to purchase gold.  What a novel thought.

RafterManFMJ's picture

If you're unemployed, underemployed, or on welfare your household gets 10 grand.

If you're middle class, both you and your spouse work, your household gets 1 grand.

formadesika3's picture

-- If you're unemployed, underemployed, or on welfare your household gets 10 grand.

This is a good idea but if just anyone gets the money, then a lot of old people will pay down their debt and just sit in their homes and not spend anything.

This is why the money should be targeted to young adults of college-age. They can then pay off their student loans and get their lives started by spending more money even if it means going further into debt -- mortgages, furniture, cars, vacations, etc... It should be a lot more than 10 grand however. It should be enough to pay off their loans in full. This is exactly why Hillary has made that a campaign issue. Forgive the student loan debt and give everyone a free college education.

I for one am all for it. Let's get this country moving again!

forexskin's picture

get the country going again by subsidizing the largest defaulting block of bad debt since the sub-prime mortgage? who do you think gets the bux handed to the students to pay off their debt? really?

the stupid is strong in this one...

AMPALANCE's picture

Just the typical I want it free regardless of what it cost you "hillery" supporter, walk on by, there is no hope or help for those, to stupid to survive.

tarsubil's picture

If you're middle class, male, divorced, and have a kid, you get fucked in the ass without lube. Such is life, I guess. Might have something to do with my lack of patriotism.

gammab0y's picture

I suggest we first try dropping bankers from helicopters.

tarsubil's picture

I second that motion. Discussion?

newbie vampire's picture

"Discussion?"

Naw, you'll find most would give it whole-hearted support.  It would be a great earner selling tickets to anyone wanting to push out one of the banksters.

tmosley's picture

"Helicopter money"

Sounds more like he is advocating nationalization by citing British Leyland. I don't know of what--the banks I guess.

Calmyourself's picture

"Are they really this stupid?" No they are this scared and this desperate, their are not enough islands to hide the bankers..

Mine Is Bigger's picture

They seem to be stupid enough to forget economics is not science, and never worked in real life, anywhere in the world.

currentsea's picture

death to central banks?  that's what jfk thought.  needless to say he didn't age gracefully.

Bobbo's picture

It's easy:  TAX FX trades 0.10% per transaction.  Money will then magically appear everywhere.

Lanka's picture

It would be preferable to: (a) charge a 5 cent tax for each 100 shares of cancelled trade on any of the stock exchanges, which would curtail the fraudulent bid stuffing by the algos to skim a few cents, and (b) adjust the income tax tables so that an adjusted gross income up to $50,000 is taxed at 0 %.

thecondor's picture

Bobbo  ''TAX FX trades 0.10% per transaction.  Money will then magically appear everywhere''

 

Lanka '' (a) charge a 5 cent tax for each 100 shares of cancelled trade on any of the stock exchanges, which would curtail the fraudulent bid stuffing by the algos to skim a few cents, and (b) adjust the income tax tables so that an adjusted gross income up to $50,000 is taxed at 0 %.''

 

 

I vote for all three.

Jack Napier's picture

A good idea, but using static numbers doesn't work with inflation over time. Instead of $50,000 use the average median household income, and instead of a 5 cent tax make it a percentage of the size of the position in dollar terms.

bbq on whitehouse lawn's picture

Its not the taxes that are the biggest problem, its the moats that protect businesses and empolyment from compitition. Remove them and youll see a growing economy.
Too many rules, too many laws that protect rents rather then people.

Bangin7GramRocks's picture

You dingy dickwad! Everyone knows that money comes from algorithms.

Miffed Microbiologist's picture

Hi oldphart, I have a message for you. Turn on chat if you like.

Miffed;-)

Bangin7GramRocks's picture

Old Phart and Miffed sittin in a tree, K I S S I NG.

surf0766's picture

Boskin Comission was the nail in the coffin

Bobbo's picture

"...why shouldn’t public sector bypass markets altogether and inject stimulus directly into the ‘blood stream’?"

Enter Stage Rightr: Bernie Sanders and the Trillion$

junction's picture

Malcolm Turnbull sworn in on September 15, reports of helicopter money now surfacing September 18.  Fast work, Goldman Sachs.

Mentaliusanything's picture

Another Z hedger that knows the Goldman connection. They are taking over large countrys policy making bit by bit.

 

Money Boo Boo's picture

Australia and New Zealand as sovereign nations are pretty much meaningless now, there has been a silent coup and their own inhabitants are by in large unaware of this fact

farmerunder's picture

One only has to understand the significance of the ISDS component of these phony trade agreements to understand what u say, sadly i think the next episode of the bachelor/ette matters more.

thetruthhurts's picture

They are injecting money for nothing and chicks for free now........food stamp and welfare and medicaid

Cranker up Mr Yellen!

Jumbotron's picture

Jeebus.  All they have to do in allow everyone below $500,000 the Earned Income Tax Credit.

Means test it based on initial income and number of dependents in family. 

Under $50,000....you get an additional $50,000 if you have 2 kids

$50,000-100,000....you get $40,000

100,000-200,000....you get $30,000

200,000-300,000...you get $20,000

300,000-500,000...you get $10,000

Here's the kicker.  For as long as they do that, you don't get dinged with a higher tax bracket as well.  Virtual Tax Break.

Implied Violins's picture

I smell a trap, like the money will be slathered in peanut butter, meant to drag us out...will it come with mandatory vaccinations? Will we have to sign away our rights to sue Monsanto? Will we need to turn in our guns?

Peak Finance's picture

Oh no, no trap at all, it will only require a small mark of some sort on the arm or wrist..... 

undertow1141's picture

A RF id tag in your wrist to grant you access to the glorious cashless helicopter digi credit bit coin fake still backed by nothing fiat. All brought to you by nirp. NIRP it does a body good.

thecondor's picture

The RFID you speak of is in most Americans pockets, iPhones and Androids.  No need for chip implants.  Most people would not willingly get tagged for  money. But since we already have massive data siphoning instruments in our pockets, the "tagging'' has already be done.  No need for implants.  Just a convenient tool to make spending your Benny Bucks very easy.  All the Fed has to say is for Americans to download the "Stimulus App", ''Put in your SS number and you will have access to your stimulus money.  Use Apple Pay or Google Wallet for the most convenience''.  

Jumbotron's picture

Absolutely no need for anything implanted.

You already have a network of blood vessels in your eyes, your face and your hand.  Vein scanners are here now for all three body parts.  Some in the coffee houses of Scandanavia even as we speak.

Your own body is your mark. 

Which begs the question.  How many of you.....particularly those of you who believe that a coming Anti-Christ system of economics is coming soon....are willing to do the only system of economics outside of the system?  Namely barter.....with only trusted like minded individuals.  

Because now.....in this world where you and your body are the mark.....then your CHOICE is what will ultimately MARK you a willing participant in the Anti-Christ system.  Not some highly visible, easily rejected form of implantable device.  Just simply.....a scan of your face (vein scan and or retina) or a scan of your veins in your hand.

You already have the mark.   But will you participate ?

Here's the dirly little secret.  You already are.  All commerce is electronic.  Even that cash you have in your hand is simply a physical symbol of an electronic piece of debt in some computer's hard drive.  Your debit card and/or credit card is a physical means to access the global electronic banking system.  Read that again.    GLOBAL.......BANKING......SYSTEM.

Welcome to Prison Planet.  Where the MARK OF THE BEAST IS SIMPLY YOUR WILLINGNESS TO PARTICIPATE IN IT.

What will you choose ?

Seek_Truth's picture

+100

Very true.

The mark or seal of the beast, and the mark or seal of God are not a visible manifestation in the flesh, rather they have to do with the condition of the figurative heart- what one's focus in life is. Numerous scriptures prove this.

As Jesus Christ himself said numerous times and ways: "no one one can serve two masters. Either you will hate the one and love the other, or you will be devoted to the one and despise the other. You cannot serve both God and money." - Matthew 6:24

Jack Napier's picture

Just because there isn't a need for chip implants doesn't mean there isn't a want. The infrastructure isn't ready yet. Real ID has a few years to go before it's fully national, as do the banking, medical, and other corporate data integrations necessary to contain the full scope of your identity in a centralized system. We are still in the building phase, where people support things like Apple Pay and Google Wallet to sow the seeds of their own future slavery by paying to build the infrastructure of their oppression. Once everything is ready to go, when cash is obsolete, when there is no middle ground between slavery and going off the grid, that is when a mandatory implant will be feasible.

delete entry's picture

too many biblical connotations, so they are going with tracking collars.

TeethVillage88s's picture

I always thought this was a State Benefit kind of welfare. But a couple of years ago I did some research and found huge wealth transfers from the Federal Level... I guess the Federal Level Lagged behind Welfare states like Michigan, New York, Illinois, California, what ever.

IRS, Payment where earned income credit exceeds liability for tax 2014 = $60.09 Billion
IRS, Payment where earned income credit exceeds liability for tax 2013 = $57.5 Billion
IRS, Payment where earned income credit exceeds liability for tax 2000 = $26 Billion
IRS, Payment where earned income credit exceeds liability for tax 1998 = $23.2 Billion

IRS, Payment Where Child Tax Credit Exceeds Liability for Tax 2014 = $21,49 Billion
IRS, Payment Where Child Tax Credit Exceeds Liability for Tax 2013 = $21.6 Billion
IRS, Payment Where Child Tax Credit Exceeds Liability for Tax 2000 = $806 Million (Million)
IRS, Payment Where Child Tax Credit Exceeds Liability for Tax 1998 = Zero.....

wow. Just wow.

jerry_theking_lawler's picture

Good lord folks....this is simple and only one thing matters.

IT'S THE FLOW...Bichezzz!!