sábado, octubre 08, 2016




Helicopter Money Is in the Air

Robert Skidelsky
. Newsart for Helicopter Money Is in the Air

LONDON – Fiscal policy is edging back into fashion, after years, if not decades, in purdah. The reason is simple: the incomplete recovery from the global crash of 2008.
Europe is the worst off in this regard: its GDP has hardly grown in the last four years, and GDP per capita is still less than it was in 2007. Moreover, growth forecasts are gloomy. In July, the European Central Bank published a report suggesting that the negative output gap in the eurozone was 6%, four percentage points higher than previously thought. “A possible implication of this finding,” the ECB concluded, “is that policies aimed at stimulating aggregate demand (including fiscal and monetary policies) should play an even more important role in the economic policy mix.” Strong words from a central bank.
Fiscal policy has been effectively disabled since 2010, as the slump saddled governments with unprecedented postwar deficits and steeply rising debt-to-GDP ratios. Austerity became the only game in town.
This left monetary policy the only available stimulus tool. The Bank of England and the US Federal Reserve injected huge amounts of cash into their economies through “quantitative easing” (QE) – massive purchases of long-term government and corporate securities. In 2015, the ECB also started an asset-buying program, which ECB President Mario Draghi promised to continue “until we see a sustained adjustment in the path of inflation.”
QE has not been a magic bullet. While it helped stop the slide into another Great Depression, successive injections of money have yielded diminishing returns. The ECB’s announcement of its policy narrowed the gap in bond yields between Europe’s core and periphery. But a study by Thomas Fazi of the Institute for New Economic Thinking emphasizes QE’s lack of influence on bank lending, the increase in non-performing loans, and the dire output and inflation figures themselves. Moreover, QE has undesirable distributional consequences, because it gives money to those who have already have it, and whose current spending is little influenced by having more.
Policymakers should have been alert to the likelihood of this mediocre outcome. When central banks try to reduce inflation by pumping liquidity out of the system, their policy is subverted by commercial banks’ ability to pump it back in by making loans. In today’s deflationary environment, the reverse has happened. Central banks’ attempt to pump in liquidity to stimulate activity is subverted by commercial banks’ ability to pump liquidity out by augmenting reserves and refusing to lend.
That leaves fiscal policy. The logic of current economic conditions implies that governments should be taking advantage of ultra-low interest rates to invest in infrastructure projects, which would both stimulate demand and improve the structure of the economy. The problem is the climate of expectations. As the Oxford economist John Muellbauer says, treasuries and central banks have been “hammering into the consciousness of the private sector the importance of reducing gross government debt relative to GDP.”
This orthodoxy arises from the idea that borrowing is simply “deferred taxation.” If the private sector believes that taxes will have to rise to pay for government borrowing, according to this view, people will increase their savings to pay the higher taxes, thus destroying any stimulative effect. The orthodoxy mistakenly assumes that government spending cannot generate any extra income; but so long as it prevails, debt-financed fiscal policy is ruled out as a means to revive economic growth.
As a result, analysts and policymakers have started mooting ideas for unconventional fiscal policy to supplement unconventional monetary policy. In particular, they are debating variations of so-called helicopter money, following a famous thought experiment by Milton Friedman in 1969, in which “one day a helicopter…drops an additional $1,000 in bills from the sky.” Former Federal Reserve Chairman Ben Bernanke, among others, has offered influential support for “helicopter drops” to revive flagging economies.
Helicopter money comes in two forms, which could (and should) be dropped together. The first is to put purchasing power directly into the hands of consumers – for example, by issuing each voter or citizen with smart cards worth $1,000 each. The Swiss economist Silvio Gesell, who originally proposed a scheme of “stamped money” at the start of the last century, added a stipulation that balances unspent after a month should be taxed, to discourage hoarding.
Alternatively, helicopter money could be used to finance infrastructure spending. The advantage of such “monetary financing” is that such spending, while adding to the deficit and leading to a permanent increase in the money supply, would not increase the national debt, because the government would “owe” the money only to its own banker. This would eliminate the offsetting negative expectation of higher taxes.
Surely, issuing debt that never has to be repaid is too good to be true, right? There is indeed the obvious danger that governments might easily become addicted to monetary finance to pay for private and public spending, which is why it is unlikely to be tried openly unless economic conditions worsen significantly. But the political risk of doing nothing if we stumble into another recession (as seems quite likely) is worse. Like it or not, unconventional fiscal policy could well be the next game in town.

Lemmings Only Function in The Stock Market is to Serve as Cannon Fodder

By: Sol Palha

"A genius can't be forced; nor can you make an ape an alderman." 
~ Thomas Somerville

From the Tulip bubble to the financial meltdown of 2008, the theme has been the same. The masses never learn, they always cry foul on the way down but gurgle with joy on the way up. In other words, when they are making money, they are okay with the risk, but when they start to lose, they scream bloody murder.

Nature created the masses to serve as cannon fodder, and no matter what is done, nothing will change this. History is replete with examples of individuals who tried to help the masses; their only reward, in general, was the gallows or the bullet, depending on the era. It comes down to perception; you cannot force someone to latch on to yours and vice versa. This is why the Fed spends such an inordinate amount of time to alter the masses perception, and it was done gradually over a period of many decades. Try talking to a regular person about the dangers of Fiat and how the Fed is ruling the world; most will roll their eyes at you and treat you like are a madman. Sadly, the Gold Bugs do not understand this concept; there is no such thing as absolute truth because any truth or lie is based on the angle of observance and depending on the angle, the truth could appear to be a lie to another. The top players have done a fantastic Job of conning the masses, and it will take an impressive amount of pain and misery to change their outlook. Thus without a doubt, we can state that today's mountain of debt which appears insane might one day seem to be sane in comparison ten years from today.
Federal Debt: Total Public Debt

It took over 100 years for the debt to get to $1 trillion; in fact, the debt was below $1 trillion until 1981. Now we add a trillion dollars to the deficit almost every year. Isn't that insane; if the masses were going to rebel, should this not this be their moment to take a stand. Think about this for a second; we are creating the equivalent of 100 year worth of debt in just one year and not a peep from the masses; who's to say the debt cannot be pushed to 100 trillion or 500 trillion. After all, they are just digits on a machine, and this money can be created in seconds.

We know it is hard to change the way you think especially since everything is painted in a black and white by the mainstream; you are usually given two false narratives to choose from.

This is why it is dangerous to follow mass media as their main goal is to make a mountain out of a molehill. On one side you have those that embrace Fiat and on the other hand, you have those who despise it. What if both were wrong, what if the top players purposely created the scenario so that these two groups would flourish and in doing so hide the real picture. FIAT is not bad, it is bad only because private bankers control the money supply, and these bankers are the biggest crooks in the world. It is like putting a fox in charge of the hen house, nothing good will come of it. If they were not in charge of it, the outlook would not be so bad. If we have a gold standard and crooks are allowed to control the reserve, which is the case currently, what's to prevent them from lying to the masses? Latching on to any perspective prevents you from seeing the other half of the equation, and that is the elite player's master game plan; to make you take a side and stick to it. Remember there always at least three perspectives to any situation neutral, negative or positive), but the masses will only see two and latch onto one of them. If the premise is wrong, no matter how hard you try, you will never find the right answer. This is why the solution is to identify the real problem and not grab one of the solutions being pushed on you by these false prophets.

Game Plan

The Fed is hell bent on flooding the system with money; there is no option but to devalue the currency or die. This is what every central bank worldwide is doing. Despite making a big noise, the BOJ and the Fed did exactly the opposite of what they were proclaiming all along.

How can the Fed even hope to embark on a more aggressive path of raising rates, if the complete economic recovery is a joke?

Any central bank that embarks on a rate hiking course runs the risk of destroying their economy. The real solution is to let the economy go through a cleansing phase, but today's society is not ready to deal with such pain. Central bankers are more than happy to accommodate this stance, for it means they can pretend to help the masses while fleecing them of their last penny. The stock market will continue to roar until the masses embrace this market. As the masses hate this market, it has a long way to go before it blows up. In addition to playing the trend in equities, it makes sense to own some bullion (Gold and Silver) as we the experiment central bankers are conducting has never been done before.

"Ability hits the mark where presumption overshoots and diffidence falls short."  
~ John Henry Newman

The Many Sad Fates of Mr. Toledano


Afraid of dying? Don’t be. Over a period of three years, I stood by my friend’s side while he became homeless and obese, got disfiguring plastic surgery, had a stroke, became an alcoholic, and got busted for insider trading. Then I watched him die — seven different ways. And, truthfully, it may have been the best thing that’s ever happened to us.
The experience became a story of middle-aged angst, and a test case in how to tame it. It’s one few of us avoid; for me, it began in 2009, when my father passed away. As the grieving and pain receded, a new kind of fear crept into my 41-year-old mind. It came in the form of insomnia, fueled by the realization that — although I didn’t know how, or when — I was going to die.
Then I ran into Phil Toledano, an old friend and a prominent Manhattan photographer. Phil, too, had just lost his father, and was suffering from similar anxiety. He said, “I want to know what’s going to happen to me ... in the future.” And then he set out to find the answers.
It started subtly enough, with DNA tests and consultations with fortunetellers. Then he upped the ante: He had a makeup artist use prosthetics to transform him into a character in any number of fatalistic fantasies, so that Phil could live out and actually photograph himself experiencing every possible future he could imagine.
When I interviewed Phil’s wife, Carla, she was deeply worried that this exercise, and its attendant fixation on death, would make him depressed.
But Phil continued. For three more years. I watched dozens of new characters emerge, and the couple’s dining room table filled with 8x10 glossies of Phil in various stages of horrific decay.
But it somehow became an extreme form of exposure therapy. Instead of tucking them away as most of us do, Phil faced his fears — really, all of our fears — head-on. He made them tangible, cataloged them, examined them. And he began to feel better.
Last year, he declared, “I’m done with the project.” When I talked with Carla about it, she said, “Phil has changed. In a good way.”
Sure, it could just be a case of three years passing and time healing wounds. But I can’t help wondering if it might be good to stare at our greatest fears, to study our darkest possible futures.
After all, if we’re going to worry, why not take a peek at exactly what we’re worried about?