# Keep Your Head On A Swivel And Cash In Your Pockets



## Mosinator762x54r (Nov 4, 2015)

OK if we are to believe everything is awesome...why would an article like this be floated on a MSM website like CNN?

And how is this any different than the stimulus rebates that we got under W. and during the first term of Obama??? And didn't that add TRILLIONS to our national debt???? Someone please tell me this shite isn't going to happen.

Helicopter money: central banks' last resort - Apr. 26, 2016

by Patrick Gillespie @CNNMoney April 26, 2016: 12:34 PM ET

Imagine cash spewing out of a helicopter over your neighborhood.

Central banks -- struggling to spark growth -- are basically talking about it.

"It's a last resort of a desperate economy," says Kathy Jones, chief fixed income strategist at Charles Schwab. "I wouldn't rule it out."

Ahead of the Federal Reserve's meeting that started Tuesday, an old metaphor -- helicopter money -- is gaining new traction as world leaders try to improve global economic growth, which the IMF recently described as "fragile."

Famed economist Milton Friedman first introduced the idea of helicopter money in 1969. Essentially, as former Fed Chair Ben Bernanke recently put it, the Fed would write a huge check to the U.S. Treasury office, which would then send tax rebates (read: cash) to millions of Americans.

Related: Yellen: Fed to move cautiously

The thinking and hope behind such an action is that Americans would then spend the money. Consumer spending makes up the majority of U.S. economic activity so more spending would boost the country's growth prospects, which are currently very dim. First quarter economic growth figures come out Thursday and growth is projected to be below 1%.

No one expects the Fed to announce that it will start a helicopter money program or even make a move on interest rates when its meeting ends Wednesday. But mere talk of helicopter money illustrates how desperate central bankers are to spark growth.

Japan and the European Central Bank are using negative interest rates to stimulate spending. The ECB is also in a bond buying spree. Last year China's central bank spent billions to ease the country's economic slowdown.

Experts across the spectrum say Japan, which has struggled with deflation, is the most likely to consider using helicopter money. But so far its central bank chief has denied any interest in the idea.

Reporters asked ECB President Mario Draghi last week about helicopter money. He says the ECB has no such plans and that it hasn't been discussed. He argues that helicopter money is fraught with challenges.

"It's a very interesting concept," Draghi noted. However: "The concept is fraught with operational, legal and institutional difficulties. But the bottom line is we have never discussed it."

One person who isn't dismissing helicopter money is Bernanke. In fact, in a 2002 speech he referenced Milton Friedman's famous lines, thinking everyone would know what he was talking about. But no one really did, and Bernanke was dubbed at the time as "helicopter Ben."

*In an April blog post, Bernanke says helicopter money is "extremely likely to be effective" if it's ever used, albeit as a last resort.*

He argues helicopter money from a central bank would be better than Congress increasing spending or creating a tax cut -- both of those options risk driving up the national debt or making it more expensive to pay off debt down the road.

But if the Fed paid for a tax rebate, America's debt burden wouldn't go up, Bernanke argues. Helicopter money could be used in other ways too, such as financing a major infrastructure program, creating jobs, more incomes and higher spending.

Helicopter money still faces key roadblocks. Who decides how much money and how it's implemented are thorny topics. There's also a risk that such a program could muddle the independence central banks are supposed to have from lawmakers and politics.

No matter whether it is ever considered, bottom line is that even talk of helicopter money is just a sign of the times that central banks may consider anything to reboot the the global economy.

*"Helicopter money could prove a valuable tool," Bernanke wrote. "Under extreme circumstances...such programs may be the best available alternative. It would be premature to rule them out." *


----------



## Maine-Marine (Mar 7, 2014)

Some old same old, nothing to see here.. everything will be fine..


----------



## Mosinator762x54r (Nov 4, 2015)

I have seen that before when a buddy of mine was describing common core math.



Maine-Marine said:


> Some old same old, nothing to see here.. everything will be fine..


----------



## KUSA (Apr 21, 2016)

If they dropped the money in the hood they would kill each other to get it.


----------



## Camel923 (Aug 13, 2014)

Sounds suspiciously like the Weimar Republic.


----------



## 1skrewsloose (Jun 3, 2013)

Sounds like something Biden once said, don't have the quote. The government gets out of debt by spending more money. I should have went out and maxed out my CC, but knew better. We continue to elect idiots. jmho.


----------



## Seneca (Nov 16, 2012)

Sound like they want to cut out the middle men. By the time the so called stimulus money gets to the people who actually would stimulate the economy it's been siphoned off to the point that it is too little too late. After everybody upstream takes a cut there's really not much left, so yeah they might as well sprinkle it over neighborhoods.


----------



## 1skrewsloose (Jun 3, 2013)

The percentages are probably worse today than in earlier times. Used to be every dollar sent to Washington, 75 percent was ate up by the bureaucracy.


----------



## Mosinator762x54r (Nov 4, 2015)

Yes that is one side of the theory. I am reading about it now. From what I have read so far when the treasury creates the bonds to fund the "helicopter money" in order for it to be effective they must agree not to sell them (as you describe keeping the middle man out of the equation just a different part of the equation).

Helicopter money was used pre WW2 to fund the war effort and to monetize the debt (if I am reading correctly). Inflation spiked briefly afterwards into the mid 30% range and then settled down into the single digits.

Here is another article on a MSM website. Read through and let me know what you think if you have a few minutes. Gives a few examples of times where this worked and where it didn't.

Also the comment section is quite interesting. WE PREPPERS aren't the only ones that know that the S is about to H T F. I am beginning to wonder if this sentiment is what has been pushing gold and silver up since the beginning of the year.

The Time and Place for ?Helicopter Money? - Real Time Economics - WSJ

With fiscal and monetary policy reaching their limits, the search for new solutions to the world's low-growth, low inflation rut has turned to "helicopter money."

The policy gets its name from an essay by Milton Friedman in 1969 that imagined newly printed money dropped from helicopters. While it evokes images of Weimar Germany and hyperinflation, it's actually not that exotic or, for the U.S., unprecedented. It's a logical option for any country struggling with deflation and slow growth, as Japan has and perhaps other countries some day may.

Peter Praet, the European Central Bank's chief economist, recently noted, "All central banks can do it. The question is, if and when is it opportune." Richard Clarida, a Columbia University economist, predicts: "We will see a variant of helicopter money (perhaps thinly disguised) in the next 10 years if not the next five."

"Helicopter money" came from economist Milton Friedman's 1969 essay, "The Optimum Quantity Of Money."
"Helicopter money" came from economist Milton Friedman's 1969 essay, "The Optimum Quantity Of Money." Photo: KEYSTONE/GETTY IMAGES

Mr. Friedman used the helicopter as a metaphor to argue that the government could always create inflation by printing enough money. As people spent the money, nominal gross domestic product would rise-either through the production of more goods and services, higher prices or both.

Haven't central banks been doing that, through quantitative easing, known as QE? No. Helicopter money-which, in its more practical forms, is called monetary finance, or monetizing the debt-is used to purchase goods and services. With QE, the newly created money is used to buy government bonds. This pushes down bond yields, which should make consumers borrow and spend more-as interest rate cuts do in normal times. But that may not work, if people are so risk-averse they are willing to hold Treasury bills or cash with no return whatsoever rather than spend.

Helicopter money is also different from traditional fiscal stimulus. Then, the government sells bonds to the public and uses the proceeds to directly stimulate demand, for example by building highways, hiring teachers or cutting taxes. But eventually more government borrowing will push up interest rates, hurting private investment and raising solvency worries. Households, expecting their taxes to rise, may spend less (a phenomenon dubbed Ricardian equivalence).

Helicopter money merges QE and fiscal policy while, in theory, getting around limitations on both. The government issues bonds to the central bank, which pays for them with newly created money. The government uses that money to invest, hire, send people checks or cut taxes, virtually guaranteeing that total spending will go up. Because the Fed, not the public, is buying the bonds, private investment isn't crowded out.

Unlike with QE, the Fed promises never to sell the bonds or withdraw from circulation the money it created. It returns the interest earned on the bonds to the government. That means households won't expect their taxes to go up to repay the bonds. It also means they should expect prices eventually to rise. As spending and prices rise, nominal GDP goes up, so the debt-to-GDP ratio can remain stable.

If this sounds too good to be true, it's because usually it is. Throughout history, governments that couldn't or wouldn't collect enough taxes to finance their spending resorted to the printing press, from the U.S. Confederacy in the 1860s to Zimbabwe in the 1990s. It's why so many central banks, including the ECB, are prohibited from financing government deficits.

But just because monetizing the debt can cause hyperinflation doesn't mean it must. In ordinary times, the Fed is continuously monetizing debt to create enough currency to lubricate the wheels of commerce. Between 1997 and 2007, before QE began, its holdings of government debt rose by $355 billion, and currency in circulation rose by a similar amount. In effect, the government borrowed and spent $355 billion and never has to repay it.

In that instance, the Fed only created as much currency as the public wanted. What if it created more, to finance government spending? Even that isn't necessarily catastrophic. In his book "Between Debt and the Devil," which advocates helicopter money, the British economist Adair Turner cites Pennsylvania in the early 1700s, the U.S. Union government in the 1860s and Japan in the early 1930s as examples of governments that used monetary finance without triggering hyperinflation.

An even better example is World War II. The federal government had to borrow heavily to finance the war effort and the Fed helped by buying bonds to keep their yields from rising above 2.5%. Between 1940 and 1945, the Fed's holdings of debt rose from $2.5 billion to $22 billion, an increase roughly equal to 9% of annual GDP. Though this only financed a fraction of the war, it was still debt monetization: most of those purchases proved to be permanent.

The war effort massively boosted nominal GDP. Initially, only part of that showed up as higher prices, thanks to wage and price controls. Most of it came through a stunning rise in real output, made possible by the economy's depressed prewar state, a flood of women into the labor force and business innovation to meet the demands of war and the civilian economy. As wage and price controls ended, prices shot up 34% between 1945 and 1948. But then, inflation reverted to low single digits.

Today, governments are trying to get inflation higher, not lower. But QE and deficit spending to date have yet to accomplish that. Would helicopter money? Mr. Clarida, who is also an adviser to bond manager Pacific Investment Management Co., says to have the desired effect central banks and governments must coordinate at the outset. Rather than commit, as the Fed has done, to eventually get rid of its bonds, it must promise to hold them forever. "If markets expect the new debt to be sold into the market in the future, that would depress consumption as households and firms expect a future tax increase." Moreover, he notes, the Fed must not pay interest on the reserves it creates when it buys the debt, as that would negate the fiscal benefits.

The main concern with monetary finance is that inflation is an arbitrary tax on holders of cash and bonds. If politicians get used to the printing press, they could let inflation rip, destroying the wealth of many households.

Mr. Turner says, "There is no technical reason money finance should produce excessive inflation." The government could require banks to hold more of the newly created cash as reserves at the Fed. By limiting how much banks can lend, the government would limit how fast nominal GDP would rise.

Another obstacle is the institutional separation between monetary and fiscal policy. That separation exists for a good reason: Central banks were granted independence so that they would not become the printing press for feckless politicians. The Fed was uncomfortable doing the Treasury's bidding during World War II and dates its de facto independence to the end of the arrangement in 1951. In 2013, Treasury was advised to sell the Fed a platinum coin to get around the statutory debt ceiling. Treasury dismissed the idea as a dangerous violation of Fed independence.

Tampering with this long-standing separation should not be done lightly. For the U.S., which is at close to full employment and in no imminent danger of deflation, the tradeoff hardly seems worthwhile. But there may be times, and countries, when it is. Monetary finance isn't riskless, Mr. Turner says, but the alternatives may be worse: stagnation and deflation, or perpetually low interest rates that fuel dangerous bubbles: "The money finance option should not be excluded as taboo."



Seneca said:


> Sound like they want to cut out the middle men. By the time the so called stimulus money gets to the people who actually would stimulate the economy it's been siphoned off to the point that it is too little too late. After everybody upstream takes a cut there's really not much left, so yeah they might as well sprinkle it over neighborhoods.


----------

