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Helicopter Money

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Helicopter Money

Unread postby MonteQuest » Sun 17 Jan 2016, 18:14:28

Could we see debt-free “helicopter” money dropped on Main Street?

Is that how we “prime the pump” now that QE has failed and interest rates have gone to zero?

Helicopter money would involve the FED creating reserves and then giving it away to the general public via a deposit into their bank account. Of course, helicopter money is meant to be a stimulus for new spending, and not an “increase in the money supply.” That would cause inflationary pressures. The FED, using monetary policy would rein in the “money supply” via bond selling....that's is, if anybody would buy them. :roll:
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Re: Helicopter Money

Unread postby onlooker » Sun 17 Jan 2016, 18:23:34

I suspect they would employ that option but only when the economy is truly in dire economic straits and consumers are really hurting. But it seems to be this is just a stop gap band aid measure as the underlying drags to the economy like peak oil and consequent inflation and deflation pressures along with debt overload continue to drag down ever more the economy. And that fact that this strategy would cause inflationary pressures means that it is a tacit resignation that the whole debt economic model is destined to falter and disappear in the absence of growth and/or contraction.
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Re: Helicopter Money

Unread postby Cog » Sun 17 Jan 2016, 19:02:09

Didn't the government send out some sort of stimulus checks a few years ago? Its a bit hazy in my memory but the amount was not large. I could see the government doing something small scale like that again.
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Re: Helicopter Money

Unread postby radon1 » Sun 17 Jan 2016, 19:43:27

Ideally, helicopter money should be thrown somewhere in the developing world, where the conditions are the best for the development - location (logistically), population density, no corruption etc.

With a bit of luck, a similar situation has happened in the past, namely - Marshall plan in Germany, but for all sorts of other reasons. The results are known. But for political reasons, this would be hardly possible today, because the main street would presumably be very unhappy with giving the money to strangers somewhere out there in the developing countries.

If helicopter money are simply thrown at the main street, then they will be quickly siphoned off by the financial sector via "consumption", with little to no effect, because the main street's degree of the division of labor is at its highs. So, it's really safer to do this the way Mr. Ben has done it, since the effect is the same, but the control over the flows is much better.
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Re: Helicopter Money

Unread postby peripato » Sun 17 Jan 2016, 20:23:16

I can't see what more can be done at this point. It's all been tried, several times now: the money printing, the debt monetization, pump-priming of the stock market with free money for share buybacks. Subprime loans for students, car loans for deadbeats...

Doesn't mean they won't try it. Anything to keep BAU running for as long as possible. That's the aim...
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Re: Helicopter Money

Unread postby MonteQuest » Sun 17 Jan 2016, 20:33:21

onlooker wrote: And that fact that this strategy would cause inflationary pressures means that it is a tacit resignation that the whole debt economic model is destined to falter and disappear in the absence of growth and/or contraction.


The thinking is that it would be used to fight deflation, so inflation wouldn't be a worry. And if it did, they could sell bonds to shrink the money supply. With the capital flight of money out of China to dollar denominated assets, that might work...until it doesn't. :roll:
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Re: Helicopter Money

Unread postby MonteQuest » Sun 17 Jan 2016, 20:36:07

Cog wrote:Didn't the government send out some sort of stimulus checks a few years ago? Its a bit hazy in my memory but the amount was not large. I could see the government doing something small scale like that again.


But those rebates were added to the debt. This wouldn't be.
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Re: Helicopter Money

Unread postby MonteQuest » Sun 17 Jan 2016, 20:41:09

radon1 wrote: So, it's really safer to do this the way Mr. Ben has done it, since the effect is the same, but the control over the flows is much better.


You mean, QE? That hasn't worked, for many reasons. The FED bought bad banks debt with reserves, then paid the banks interest on the excess reserves they held. Pretty sweet deal. Why loan it out and risk a loss?
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Re: Helicopter Money

Unread postby MonteQuest » Sun 17 Jan 2016, 20:55:22

peripato wrote:Doesn't mean they won't try it. Anything to keep BAU running for as long as possible. That's the aim...


Helicopter money drops in China, the euro area, the UK, and the U.S. and debt restructuring . . . can mitigate and, if implemented immediately, prevent a recession during the next two years without raising the risk of a deeper and longer recession later.—Citigroup

In the UK, a helicopter money drop was put on the table by Jeremy Corbyn, the newly-elected Labor leader. Overt Money Financing (OMF) – injecting money directly into the economy.
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Re: Helicopter Money

Unread postby onlooker » Sun 17 Jan 2016, 20:59:04

MonteQuest wrote:
onlooker wrote: And that fact that this strategy would cause inflationary pressures means that it is a tacit resignation that the whole debt economic model is destined to falter and disappear in the absence of growth and/or contraction.


The thinking is that it would be used to fight deflation, so inflation wouldn't be a worry. And if it did, they could sell bonds to shrink the money supply. With the capital flight of money out of China to dollar denominated assets, that might work...until it doesn't. :roll:

Or until inflation runs amok and becomes hyperinflation and all faith in money is lost. Then what?
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Re: Helicopter Money

Unread postby MonteQuest » Sun 17 Jan 2016, 21:05:03

onlooker wrote:Or until inflation runs amok and becomes hyperinflation and all faith in money is lost. Then what?


Then we make kites out of greenbacks like they did in Weimar Germany in 1923. 8)

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Re: Helicopter Money

Unread postby onlooker » Sun 17 Jan 2016, 21:07:14

did the kites work haha?
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Re: Helicopter Money

Unread postby MonteQuest » Sun 17 Jan 2016, 21:18:48

onlooker wrote:did the kites work haha?


You bet! They called it "floating currency on the thin air from which it was created."

Boys liked kites. Girls liked using it for building blocks.

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Moms burned it to cook breakfast.

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Re: Helicopter Money

Unread postby peripato » Sun 17 Jan 2016, 21:22:57

MonteQuest wrote:
peripato wrote:Doesn't mean they won't try it. Anything to keep BAU running for as long as possible. That's the aim...


Helicopter money drops in China, the euro area, the UK, and the U.S. and debt restructuring . . . can mitigate and, if implemented immediately, prevent a recession during the next two years without raising the risk of a deeper and longer recession later.—Citigroup

In the UK, a helicopter money drop was put on the table by Jeremy Corbyn, the newly-elected Labor leader. Overt Money Financing (OMF) – injecting money directly into the economy.

Ha ha, telegraphing their intentions...Humans will try anything to keep the good times rollin', just like they'll attempt geoengineering to deal with global warming. Anything but change their own self-destructive ways. The end will be epic...
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Re: Helicopter Money

Unread postby MonteQuest » Sun 17 Jan 2016, 21:27:27

peripato wrote:The end will be epic...


Yeah, but some new jobs will be created...like sweeping discarded money from the gutters. 8)

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Re: Helicopter Money

Unread postby peripato » Sun 17 Jan 2016, 21:35:03

MonteQuest wrote:
peripato wrote:The end will be epic...


Yeah, but some new jobs will be created...like sweeping discarded money from the gutters. 8)

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Here's another job for which there will be a very high demand...
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Re: Helicopter Money

Unread postby Newfie » Sun 17 Jan 2016, 21:36:03

For those, like me, who need some background.

In 2002, following coverage of concerns about deflation in the business news, Bernanke gave a speech about the topic.[60] In that speech, he mentioned that the government in a fiat money system owns the physical means of creating money and to maintain market liquidity. Control of the money supply implies that the government can always avoid deflation by simply issuing more money. He said "The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost."[60]

He referred to a statement made by Milton Friedman about using a "helicopter drop" of money into the economy to fight deflation. Bernanke's critics have since referred to him as "Helicopter Ben" or to his "helicopter printing press." In a footnote to his speech, Bernanke noted that "people know that inflation erodes the real value of the government's debt and, therefore, that it is in the interest of the government to create some inflation."[60]

For example, while Greenspan publicly supported President Clinton's deficit reduction plan and the Bush tax cuts, Bernanke, when questioned about taxation policy, said that it was none of his business, his exclusive remit being monetary policy, and said that fiscal policy and wider society related issues were what politicians were for and got elected for. But Bernanke has been identified by The Wall Street Journal and a close colleague as a "libertarian-Republican" in the mold of Alan Greenspan.[55]
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Re: Helicopter Money

Unread postby Cog » Sun 17 Jan 2016, 22:58:43

MonteQuest wrote:
Cog wrote:Didn't the government send out some sort of stimulus checks a few years ago? Its a bit hazy in my memory but the amount was not large. I could see the government doing something small scale like that again.


But those rebates were added to the debt. This wouldn't be.


Wait wut? How in the world would it not?

Are you one of the free lunch crowd? :lol:
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Re: Helicopter Money

Unread postby MonteQuest » Mon 18 Jan 2016, 02:08:34

Cog wrote:Wait wut? How in the world would it not?


Unlike QE, where the FED swapped reserves for bad bank debt in the form of govt bonds (liquidity swap) and added them to their balance sheet, in this instance, they would merely electronically deposit created reserves right into everyone's bank account with no govt debt. Just put it on the FED ledger. Later, they could sell bonds to extract the reserves from the money supply when inflation started to rear it's ugly head and re-balance their books.

Google it. You'll see. You simply print a piece of paper, sell it to yourself, and then use the virtual pieces of paper you just printed to buy your piece of paper to stimulate the economy. Nothing to it. :roll:
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Re: Helicopter Money

Unread postby Shaved Monkey » Mon 18 Jan 2016, 05:13:01

The Australian government gave $900 to everyone(who earned less than $150,000).
Australia was one of the only countries not to go into recession.
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