Economics: Send in the helicopters?
It seems that this is an economist's idea of heaven:
It is a place with the right amount of "flation"
for neither" DE" or "IN" will do for a nation,
and it should be both unassailable
and readily available
for all people older than seven.
Though they've tried quantitative easing
the results have been displeasing
and negative interest rates hurt any bank
by causing its stock price to tank.
So, perhaps while there's still time
to conquer fear
where are the helicopters?
There ought to be helicopters
There ought to be helicopters
Well, maybe next year.
HzL
2/19/16
Send in the Clowns - Wikipedia, the free encyclopedia
https://en.wikipedia.org/wiki/Send_in_the_Clowns
Jump to Lyrics - Lyrics[edit]. The lyrics of the song are written in four verses and a bridge and sung by Desirée. As Sondheim explains, Desirée ...
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Judy Collins - Send In The Clowns - YouTube
https://www.youtube.com/watch?v=8L6KGuTr9TI
Released: 1975
Lyrics: Isn't it rich? / Are we a pair? / Me here at last on the ground, / You in mid-air,…Full lyrics on Google Play
https://www.youtube.com/watch?v=8L6KGuTr9TI
Released: 1975
Lyrics: Isn't it rich? / Are we a pair? / Me here at last on the ground, / You in mid-air,…Full lyrics on Google Play
Helicopter Drop Definition | Investopedia
www.investopedia.com/terms/h/helicopter-drop.asp
Helicopter drop is largely a metaphor for unconventional measures to ... tool of monetary policy that involves printing large sums of money and distributing it to ...
Investopedia
It Begins: Desperate Finland Set To Unleash Helicopter ...
www.zerohedge.com/.../it-begins-desperate-finland-set-unlea...
Dec 6, 2015 - With Citi's chief economist proclaiming "only helicopter money can save ... It Begins: Desperate Finland Set To Unleash Helicopter Money Drop ...
Zero Hedge
Reviving the economy
Send in the helicopters?
FORMAL QE has paused, in America and Britain at least, although it continues in Japan and may well be attempted in the euro zone. With the US and British economies growing at 2.5-3% over the last 12 months, and with unemployment having fallen, the need for unconventional stimulus seems to have reduced. However, with the forces for secular stagnation so powerful (see the graphs), one wouldn't want to bet against the Fed or Bank of England trying again.
But would QE, as so far practiced, be the best approach? The rationale has been that, by forcing down yields at both the short and the long end, QE has discouraged saving and encouraged borrowing. Furthermore, it has pushed investors into risky assets, lowered corporate and mortgage-related borrowing costs, and thus boosted confidence. The problem is that bond yields haven't really moved as they were supposed to; often rising during QE periods and falling when it stops. And to the extent that QE has boosted asset prices, it may have helped the wealthy far more than the bulk of the population.
So what about a different approach? The idea of a helicopter money drop has been mooted by Milton Friedman and Ben Bernanke, among others. There was a very thoughtful essayabout this in Foreign Affairs by Mark Blyth and Eric Lonergan and today, there is a comment piece by Simon Jenkins (ex-Times editor) in The Guardian. A literal helicopter drop would lead to riots, of course. But cash could be placed directly into bank accounts or the government could give investors a tax rebate, with the central bank creating the money to do so. Blyth and Lonergan suggest that
The government could distribute cash equally to all households in terms of income, or even better, aim for the bottom 80 per cent of households in terms of income. Targeting those who earn the least would have two primary benefits. For one thing, lower-income households are more prone to consume, so they would provide a greater boost to spending. For another, the policy would offset rising income inequality.
This sounds fairly revolutionary - central banks intervening in fiscal policy and the "monetisation" of debt. (Clearly, this would have to be with the agreement of the government, although that raises the question of whether this would be an appropriate tactic in an election year.) But this is, in part, a fiction. Governments have surely found it easy to run deficits because central banks have bought bonds and forced down yields (and there is confirming evidence from Greece, Portugal etc where central banks were not so supportive.) Furthermore, we have surely monetised the debt already. There is no sign of governments paying it back; central banks will simply have much bigger balance sheets than before. And the interest on the bonds is being remitted by central banks to the government. The difference between handing over cash and giving someone an interest-free loan is purely a matter of semantics.
Blyth and Lonergan also argue that cash transfers would be more efficient than current QE, which requires a lot of money creation. They estimate that cash transfers of 2% of GDP would boost the economy by 2.6% (using a multiplier of 1.3). It would also be more efficient, they argue, than our suggestion of boosting infrastructure, since projects take so long to build.....
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