" Helicopter money " coming to Japan and then USA

[midas]

This week it was reported in Japan's Senkei and later Bloomberg that the Japanese government will be adopting “helicopter money” in the form of yet another stimulus plan- this time 10 TRILLION yen.

Now a few days later a top official from the US Federal Reserve has said "helicopter money" could be considered to stimulate America's economy if conventional monetary policy fails.

"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.

I think even a first-year economic student would ask the question if things are so good regarding the US economy and the 'recovery' so going so well ( as they tried to represent in the job report last week ), WHY do they keep on with more and more stimulus and talk (now) of helicopter money?

Surely if QE was useful, there would be no need for a "next step." Surely the fact that helicopter money is even being considered by the US Federal Reserve is an admission that everything Obama's administration and the Fed has said about any positive effects of QE was a complete lie?

http://www.abc.net.au/news/2016-07-13/helicopter-money-a-possibility-says-fed-official/7623888

Edited July 13, 2016 by midas

[suzannegoh]

Popular alternative media pundits have been making a compelling case that hyperinflation and an exponential rise in commodity prices would be the outcome of QE since 2009. Same story throughout - stocks are going to crash and metals are going to the moon. It's very logical that that would be the outcome, the only problem is that it hasn't happened. It might at any moment but, but still, the sheeple in stocks seem to have done OK in the aftermath of the financial crisis.

[manarak]

QE and helicopter money have two very different goals.

QE is designed to keep a financial system from collapsing, i.e. keep the money flowing by augmenting liquidity of debt assets. This created much less inflation that central banks expected.

Helicopter money is designed to distribute free money to people and companies who will spend that money in the real economy. This will create inflation.

[manarak]

Popular alternative media pundits have been making a compelling case that hyperinflation and an exponential rise in commodity prices would be the outcome of QE since 2009. Same story throughout - stocks are going to crash and metals are going to the moon. It's very logical that that would be the outcome, the only problem is that it hasn't happened. It might at any moment but, but still, the sheeple in stocks seem to have done OK in the aftermath of the financial crisis.

Everyone, including central banks, overestimated how much of the QE will flow into the real economy. Experience has now shown that QE money doesn't easily escape from balance sheets, i.e. M3 does not transform easily into M2.

[suzannegoh]

QE and helicopter money have two very different goals.

QE is designed to keep a financial system from collapsing, i.e. keep the money flowing by augmenting liquidity of debt assets. This created much less inflation that central banks expected.

Helicopter money is designed to distribute free money to people and companies who will spend that money in the real economy. This will create inflation.

So which of those are the Japanese planning to do? Both the BOJ and Fed have been trying to increase inflation (or avoid deflation).

Edited July 13, 2016 by suzannegoh

[manarak]

QE and helicopter money have two very different goals.

QE is designed to keep a financial system from collapsing, i.e. keep the money flowing by augmenting liquidity of debt assets. This created much less inflation that central banks expected.

Helicopter money is designed to distribute free money to people and companies who will spend that money in the real economy. This will create inflation.

So which of those are the Japanese planning to do? Both the BOJ and Fed have been trying to increase inflation

planning?

none.

they are considering helicopter money if QE measures don't lead to sufficient inflation.

BTW, I am sceptical of QE because this is balanced money, and as such QE money is just used by commercial banks to flow into other assets such as stocks or bonds and create bubbles there.

In the bond market, the bubble is visible in sovereign debt, countries like germany borrow at negative interest rates because there is too much money available due to QE. The money is desperate to find low-risk investments and will tend to massively flow into any new opportunity and creates bubbles.

IMO, the best way to stimulate the economy would be to give everyone a 30,000 USD tax break, i.e. this amount doesn't need to be paid, instead the central bank prints the money and gives it to the government.

Edited July 13, 2016 by manarak

[midas]

QE and helicopter money have two very different goals.

QE is designed to keep a financial system from collapsing, i.e. keep the money flowing by augmenting liquidity of debt assets. This created much less inflation that central banks expected.

Helicopter money is designed to distribute free money to people and companies who will spend that money in the real economy. This will create inflation.

So which of those are the Japanese planning to do? Both the BOJ and Fed have been trying to increase inflation

planning?

none.

they are considering helicopter money if QE measures don't lead to sufficient inflation.

BTW, I am sceptical of QE because this is balanced money, and as such QE money is just used by commercial banks to flow into other assets such as stocks or bonds and create bubbles there.

In the bond market, the bubble is visible in sovereign debt, countries like germany borrow at negative interest rates because there is too much money available due to QE. The money is desperate to find low-risk investments and will tend to massively flow into any new opportunity and creates bubbles.

IMO, the best way to stimulate the economy would be to give everyone a 30,000 USD tax break, i.e. this amount doesn't need to be paid, instead the central bank prints the money and gives it to the government.

The ability to print away as infinite growth in a biosphere with finite resources is in fact impossible

And stuff tax breaks-I think people should be given the choice of receiving their hand out in gold

[wprime]

Popular alternative media pundits have been making a compelling case that hyperinflation and an exponential rise in commodity prices would be the outcome of QE since 2009. Same story throughout - stocks are going to crash and metals are going to the moon. It's very logical that that would be the outcome, the only problem is that it hasn't happened. It might at any moment but, but still, the sheeple in stocks seem to have done OK in the aftermath of the financial crisis.

They're all bull****. It's not a logical conclusion.

The US has strong deflationary forces during times of economic unrest due to money shifting from the sharemarket to treasuries. This moves creates demand for the USD which QE when done correctly just compensates for.

The only way it can lead to hyperinflation is if a large proportion of US creditors stop buying treasuries and start to dump it. They won't do this as their own economies would collapse in the process.

[swissie]

QE was useful. It kept the world economy from falling into a deflationary downward spiral. No more, no less. To achieve growth, now comes the helicopter-money.

Problem is, the world does not have enough Helicopters to handle the task.

Cheers.

[thaihome]

I'm curious how the OP went from a quote by a Fed banker that "helicopter" money would be considered if current monetary policy fails to the Obama administration and the Fed are lying about the recovery. Certainly there is no logic in the jump, just a typical biased fallacious argument.

TH

[maewang99]

It's really only gets scary when they raise, because of where they would be lifting off of.... for some bonds, below zero now. it will be entirely uncharted waters. there's only the recent movements when they first hinted of it 2 years ago or so to go by.... but that early response is probably not how it will really play out... not any more than, for example, the huge backwardation we saw in oil just ahead of the Merrill Lynch / Lehman rescue disaster in 2008. and heh, what if ag prices really begin to move up and Thailand got too hot... and raised big time faster than the Old Men in the Oxygen Tents (USA, Brits & EU)? look out if you are not hedged and get all your income from US or Euro money.

Edited July 14, 2016 by maewang99

[midas]

I'm curious how the OP went from a quote by a Fed banker that "helicopter" money would be considered if current monetary policy fails to the Obama administration and the Fed are lying about the recovery. Certainly there is no logic in the jump, just a typical biased fallacious argument.

TH

“By every economic measure, we are better off now than we were when I took office. You wouldn’t know it, but we are,”

Barack Hussein Obama June 2014

Edited July 14, 2016 by midas

[midas]

technical hitch in Japan

No chance Japan will adopt 'helicopter money' soon: sources

Adopting helicopter money in the strict sense is impossible as it's prohibited by law," said one of the officials. "If it's about the BOJ buying huge amounts of bonds and the government deploying fiscal stimulus, we're already doing that."

"It's an illusion to think that a country can spend as much money as it wants, without having to pay it back," said another official on condition of anonymity

.

http://www.reuters.com/article/us-japan-economy-helicopter-idUSKCN0ZU11Z

Edited July 14, 2016 by midas

[linksman00]

Popular alternative media pundits have been making a compelling case that hyperinflation and an exponential rise in commodity prices would be the outcome of QE since 2009. Same story throughout - stocks are going to crash and metals are going to the moon. It's very logical that that would be the outcome, the only problem is that it hasn't happened. It might at any moment but, but still, the sheeple in stocks seem to have done OK in the aftermath of the financial crisis.

"It might at any moment, but........" This is the operative statement. There will be a heavy price to pay when the music stops, but until then party on as QE and neg rates just prop up the stock exchanges around the world, however Mr. Newtons laws will eventually take effect!

[linksman00]

QE and helicopter money have two very different goals.

QE is designed to keep a financial system from collapsing, i.e. keep the money flowing by augmenting liquidity of debt assets. This created much less inflation that central banks expected.

Helicopter money is designed to distribute free money to people and companies who will spend that money in the real economy. This will create inflation.

So which of those are the Japanese planning to do? Both the BOJ and Fed have been trying to increase inflation

planning?

none.

they are considering helicopter money if QE measures don't lead to sufficient inflation.

BTW, I am sceptical of QE because this is balanced money, and as such QE money is just used by commercial banks to flow into other assets such as stocks or bonds and create bubbles there.

In the bond market, the bubble is visible in sovereign debt, countries like germany borrow at negative interest rates because there is too much money available due to QE. The money is desperate to find low-risk investments and will tend to massively flow into any new opportunity and creates bubbles.

IMO, the best way to stimulate the economy would be to give everyone a 30,000 USD tax break, i.e. this amount doesn't need to be paid, instead the central bank prints the money and gives it to the government.

Quite right, all the QE in the world will not create an ounce of inflation if it never attains any velocity, it is after all the velocity of money and its magnifier effects that create inflation. What has been happening is that all these massive banking institutions have been getting all this free money(QE) and instead of circulating it via loans for homes, new businesses ect. they have been speculating with it in the markets creating the mother of all bubbles, and when the next worldwide recession begins in earnest all this Keynesian loose money theory will be proven wrong yet again and it will wind up causing misery for billions of people around the globe.

[linksman00]

I'm curious how the OP went from a quote by a Fed banker that "helicopter" money would be considered if current monetary policy fails to the Obama administration and the Fed are lying about the recovery. Certainly there is no logic in the jump, just a typical biased fallacious argument.

TH

“By every economic measure, we are better off now than we were when I took office. You wouldn’t know it, but we are,”

Barack Hussein Obama June 2014

So true, and the U.S. may be going from the totally clueless to the totally corrupt if Mrs. Clinton were to get in.

[midas]

In a surprising rejection of Ben Bernanke, BOJ governor Haruhiko Kuroda said that there will be no helicopter money in Japan, amid increasing speculation over monetary and fiscal policy in the world’s third-largest economy. Given the current institutional setting, there is "no need and no possibility for helicopter money," Kuroda said in a BBC Radio 4 program that was broadcast Thursday. “At this moment, the Bank of Japan has three options with quantitative and qualitative easing with negative interest rates."

Edited July 21, 2016 by midas

[Agent Sumo]

In a surprising rejection of Ben Bernanke, BOJ governor Haruhiko Kuroda said that there will be no helicopter money in Japan, amid increasing speculation over monetary and fiscal policy in the world’s third-largest economy. Given the current institutional setting, there is "no need and no possibility for helicopter money," Kuroda said in a BBC Radio 4 program that was broadcast Thursday. “At this moment, the Bank of Japan has three options with quantitative and qualitative easing with negative interest rates."

Kuroda also told Japan's parliament the Bank of Japan would not take interest rates into negative territory.

A few days later . . .

[midas]

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Cheers

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