Fed's Mester Says Helicopter Money "The Next Step" In US Monetary Policy

Tyler Durden's picture

Update from the Cleveland Fed:

To whom it may concern,

 

Please delete or correct the below post, as it was based on an incorrect report. The original report from the Australian Broadcasting Corp. has been corrected. Cleveland Fed President Loretta Mester did not advocate the use of helicopter money and she does not advocate it.

 

Please see corrected ABC report upon which your posts were based: http://www.abc.net.au/news/2016-07-13/quantitative-easing-useful-fed-off...

* * *

Think "helicopter money" is/will be confined only to Japan, which has been sending conflicting trial balloons about this unprecedented next step in monetary policy for the past two days (first Japan's Senkei reported that the government will be adopting “helicopter money” followed by a government spokesman denying the report, then followed by a separate Bloomberg report about a 10T yen stimulus plan, the concluding with Abe advisor Koici Hamada saying that "boosting fiscal and monetary stimulus at the same time would be effective" in Japan)? Think again.

Speaking overnight in Australia, the Fed's Loretta Mester said "helicopter money" could be considered to stimulate America's economy if conventional monetary policy fails.

As Australia's ABC reports, Mester, president of the Federal Reserve Bank of Cleveland and a member of the rate-setting Federal Open Market Committee (FOMC), signalled direct payments to households and  businesses to stoke spending was an option if interest rate cuts and quantitative easing fail.

"We're always assessing tools that we could use," Mester told the ABC's AM program. "In the US we've done quantitative easing and I think that's proven to be useful.

"So it's my view that [helicopter money] would be sort of the next step if we ever found ourselves in a situation where we wanted to be more accommodative.

Mester's qualified support for the use of "helicopter money" comes amid expectations that the Bank of Japan is poised to unleash a major fiscal stimulus package of at least 10 trillion yen ($130 billion) to kickstart its flat-lining economy.

The surprising comments from a Fed hawk, come on the heels of two other Fed presidents hinting that more QE could be used as additional "ammo" should the US economy relapse back into recession, and as major central banks consider unconventional policy tools in a world of slowing growth, low inflation and record low interest rates. Mester said that concerns about the Brexit vote were a consideration in June when the Federal Reserve left rates at between 0.25 and 0.5 per cent, a consideration  While the immediate impact of Brexit rattled financial markets, Mester said the Fed would be looking to medium and long term fallout.

"Between now and our next meeting and future meetings we are all going to be assessing what the impact of that decision will mean in terms of economic conditions and how they effect the medium term outlook for the US economy," she explained.

Ironically, the same Mester said she believes there are risks in keeping US interest rates too low for too long. "For the US, if we overstay our welcome at zero then of course there would be financial stability risks," Dr Mester acknowledged. So her "solution" is not just more easing, but outright monetary paradrops.

"I don't think we're behind the curve in the US on interest rates, but it's something we have to assess going forward and where the risk balance is."

With the next FOMC rate setting meeting scheduled for July 28, Dr Mester declined to be drawn on whether there would be another US rate rise this year. However, she signalled her support for moving rates higher and that rising employment and inflation meant "a gradual increasing pace in interest rates is appropriate."

"I've been one of the more positive members in terms of the US economy. I do think we've made significant progress on the employment part of our mandate and the recent inflation data has been encouraging," Dr Mester said.

"But of course the timing of the next and the ultimate slope of that gradual pace will depend on how the risks around the outlook evolve."

And if all else fails, there is always Bernanke's helicopter, first in Japan then coming to the US.

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snakehead's picture

DOUBLE BUCKS IF YOU BUY STOCKS WITH IT

-Fed

SWRichmond's picture

Called it, bitches.  Natives get restless, time for free shit.

NoDebt's picture

The "accomodation".... it's ENDLESS.  I'm crying like that indian in the old TV commercial when he's looking over a giant trash heap.  And for the same reason.

 

DavidC's picture

NoDebt,
Spot on.

If things are so good and the 'recovery' so going so well, WHY do they keep on with more and more stimulus and talk (now) of helicopter money?

DavidC

VinceFostersGhost's picture

 

 

I think we should print pretty pink paper money!

 

What?

 

I like pink.....surely I'm not the only one.

SomethingSomethingDarkSide's picture

Make my options dance, you cock sucking, soulless ginger fuck!

VinceFostersGhost's picture

 

 

soulless ginger fuck

 

Wow......how did you know I was a redhead?

pods's picture

Pro Tip: If you see a helicopter about to drop something by/on you, run like hell!

pods

mayhem_korner's picture

Maybe they'll use a drone...little coercion to pick up your delivery of bux.

Dental Floss Tycoon's picture

Hope I get my handout early before the price of gold gets bid too high.

mayhem_korner's picture

Just ask for handout in gold in the first place.

You'd be the K of Spades on the trrst list.  8D

otschelnik's picture

Yea, gold!   And a 1 way ticket to Switzerland! 

MillionDollarBonus_'s picture

It's about time that our monetary officials realized that we need further stimulus. The world's top economists such as Professor Paul Krugman have been shouting from the rooftops for years now that if we fail to kick our economy into high gear, then we face a brutal recession. There are definitely green shoots sprouting throughout the economy, but this is because of stimulus measures that were taken after the crash of 07-08. Look at how stocks are rallying to all time highs, in response to dovish rhetoric. The market knows that stimulus is the only long term solution for our economy, and are pricing in the economic growth that will result from further stimulus.

IS THE CONSTITUTION STILL VALID?
LawsofPhysics's picture

Yes, finally this will be the end of the corrupt Fed!  Print away as infinite growth in a biosphere with finite resources is in fact impossible!

philipat's picture

What an ugly cunt she is? She lost me at "QE has proved to be very useful"....Yawn

And she presumably left Cleveland to avoid the convention, probably a frightened little Gubmin bunny? Nice when the taxpayer will pay to take you First Class or Private jet to Australia to talk total BS about nothing important...

SillySalesmanQuestion's picture

There seems to be a very good reason why many R's will be absent in Cleveland next week...and it's not because of The Don.

nuubee's picture

What if helicopter money drops, and everyone spends it to payback debt?

I wonder if they've considered that.

exi1ed0ne's picture

No helocopter money of any significance will ever be distributed to the masses.  Not ever.  Can't let the slaves buy their way out of the most effective shackles ever created now can we?

True Blue's picture

The slaves cannot buy their way out of their shackles with 'helicopter money', all it would do is make their chains stronger, as inflation eats up their 'gains' and returns them to 'square one'.

Meanwhile, the inflation would in fact enslave the middle class even further, as it is their taxes that would pay for the inflation that they too would experience.

So, not only would helicopter money of major signifigance be distributed, but the quantity would have to increase more and more often as it leads into a hyperinflationary spiral that will engulf the middle class and impoverish everyone but the top percent of real asset holders.

Hope that helped; buy lubricant now because soon it will be too expensive and the raw butt-fucking will continue with or without it.

JamesBond's picture

Politicians and Central Bankers have written off being able to pay the national debt.  Accepting that premise, they have no fears about stimulus programs.  How to make money off that craziness?  Well, if adding to the national debt isn't a sticking point and the S$P loves stimulus and can-kicking, then go long until the election.  

 

 

mayhem_korner's picture

I love the smell of MDB in the morning!

PT's picture

Sick, Kinky.  You like the smell of shit?

PT's picture

Aaaaaaah, the old devalue-the-neighbourhood-and-buy-it-up-cheap scam.  Does this mean someone isn't happy with George?

mayhem_korner's picture

You do know that MDB is a satirical alter-ego of one of the Tylers, right?  And that MDB posts here to incite ire from those who don't know he's a spoof and laughter from those who do, right? 

Collapsed's picture

^^^^ This guys is funny (The guy below that is). Thanks for my daily chuckle.  Have a great day everyone!

SoilMyselfRotten's picture

One cannot kick an economy into gear because if it were so, the 7 years of stimulus would have reflected it by now. Green shoots, lol, you are ironically funny.

l8apex's picture

Right on!  Go Fed!  Gimme some of that free money!  I gots to get some chrome for my ride.

N0TaREALmerican's picture
N0TaREALmerican (not verified) MillionDollarBonus_ Jul 13, 2016 10:45 AM

IS THE CONSTITUTION STILL VALID?

This is brilliant.  Keep up the good work. 

SMG's picture

MDB, You realize that if the true inflation number was reported and then subtracted from GDP as it should be, economic growth has been negative since 07-08.   That's why main street is so angry, the economy has actually been shrinking these past 8 years.  Stimulus fixes nothing and will eventually cause a horrible collapse at which point you might find an angry mob looking for people like you.

MillionDollarBonus_'s picture

These stimulus measures will make President Obama go down in history as the best President for the economy that America has ever had. He brought us from the brink of destruction to a thriving economy with a roaring stock market, making new all time highs, year after year. Amazing.

IS THE CONSTITUTION STILL VALID?

BandGap's picture

Oh, I bet he has been going down for years.

What a shit show, and in real time no less.

fukidontknow's picture

How is an elite group of crooks counterfeiting (stimulus) and putting the rest of us into perpetual debt with it good for the economy? You tell me MDB.

TheAntiGov's picture

To MDB,

I've been reading your posts for years. I think you are the most down voted poster on ZH. Are you a troll or so rich as your moniker implies that you are out of touch with reality?

mayhem_korner's picture

Once you realize that MDB is here for comic relief, you might see things differently.

Flakmeister would have a ball with you.

Lurk Skywatcher's picture

Yes, but he used to only need one comment. Nowadays he seems to be doubling and tripling down in every article, which smacks of impotence.

Kinda echos the Fed in more than just words.... ahhh, now I get it!

jcdenton's picture

MDB (that's in BOGUS) ..

 

 

Let me ask you a direct question .. (like Loretta Lynch)

 

What can you  possibly know, that an FBI Insider (apparently with SAP access) cannot?

 

https://geopolitics.co/2016/07/10/the-situation-is-so-intense-it-involve...

shovelhead's picture

Oh dear,

it's those Satanic Babylonians again and their kiddie chow-downs.

Let's burn them at the stake. How about Sunday? The Lord would approve.

eatthebanksters's picture

Obozo is a loser...he's trying despaerately to hold it all together until the election so Hillary has a chance against Trump.

GCT's picture

MDB you make my day with your satire most do not get.  +1 for the laughs.  Too bad Robotrader no longers comments, then my day would be complete.

If the fed wanted to help us pleebs they would do an income tax holiday for a couple of years.  Ahh hell I forgot me me mes would cry foul bernie and hillary would get pissed and black lives matter would file a discrimination lawsuit because those that do not work do not get their share!!!

Oh well back to work!

cowdiddly's picture

Its called a double tap when they circle back around after you grabbed the bait.

eatthebanksters's picture

Where do i go park myself to be in the best position ot catch some of these helicopter dollars?

Snípéir_Ag_Obair's picture

So... Who exactly gets the freshly baked fiat?

Lloyd and pals?

I mean ultimately...

Snípéir_Ag_Obair's picture

So... Who exactly gets the freshly baked fiat?

Lloyd and pals?

I mean ultimately...

ali-ali-al-qomfri's picture

How much coin could a fed-copter carry,

 if a fed-copter carrier could carry coin.

skeelos's picture

"As God as my witness, I thought turkeys could fly!"