Is “Helicopter Money” About to Rain Upon the World?

By David Llewellyn-Smith, founding publisher and former editor-in-chief of The Diplomat magazine, now the Asia Pacific’s leading geo-politics website. Originally posted at MacroBusiness

There’s a chart that lends a certain urgency to the Bank of Japan’s (BOJ) monetary policy meeting late this month. It is this one of the yen:

helicopter chart

Ever since the BOJ announced a new negative interest rate policy earlier this year (NIRP) the yen has stopped falling and reversed upwards. That is, despite weak Japanese growth, despite an inverted yield curve and deeply negative long bond, and despite still weak inflation, markets have bet on spectacularly easy monetary policy generating even more of all four.  This is what is know as “quantitative failure”, the notion that negative interest rates will not expand the monetary base owing to such phenomenon as crushed bank margins and the hoarding of cash under mattresses, so the currency is therefore going to rise.

CLSA has a nice little note on what this means for Japanese policy:

This is because Bank of Japan governor Haruhiko Kuroda is now looking for a new alternative form of monetary easing, given he has probably reached the practical limits of responsible JGB buying, as already discussed, while his initial move to impose negative rates in January led to the opposite market reaction than expected (ie, a stronger yen and a weaker stock market, see Figure 8) while also proving politically very unpopular. This probably explains why Kamikaze Kuroda has not expanded the negative rate policy further since January even though inflation and inflation expectations have moved in the opposite direction of what he has been targeting.

The latest data will make it harder for Kuroda to do nothing at the next BoJ policy meeting due to be held on 28-29 July given the stress he has put on monitoring inflation expectations. That is unless he just admits he has failed!

Given the unattractive options of buying still more JGBs or ETFs, or risking an undoubtedly unpopular expansion of negative rates, Kuroda and indeed Abe will be looking for a new approach. Monetisation of infrastructure stimulus may be the option.

Meanwhile, in an effort to calm potential concerns about the integrity of the fiscal budget central bankers implementing such a future monetisation of infrastructure spending will doubtless be at pains to describe the process as a “one off” though, as the ever theoretical Bernanke stated in his blog: “To have its full effect, the increase in the money supply must be perceived as permanent by the public.”

…a policy of “helicopter money” is only likely to work if it is done on an ongoing basis and in continuing and growing amounts. But at that point the risk of a policy mistake grows exponentially, in terms of a potentially destabilising pickup in inflation expectations and a related pickup in velocity.

Japan may well pick this moment to experiment further with monetary debasement. Just as China has used the post-Brexit environment to accelerate its yuan devaluation, Japan is in a better position than it was a few months ago to try something new after what was a rather cross G20 meeting in Shanghai that swore off competitive devaluations.

There is some other movement around the place to support a renewed Japanese monetary experiment. Ben Bernanke will visit the BOJ and Prime Minster Shinzo Abe this week, from Reuters:

Senior Japanese policymakers will discuss global market developments on Friday and former Federal Reserve Chairman Ben Bernanke will have talks in Tokyo next week with officials including Prime Minister Shinzo Abe, government sources said.

…Bernanke, who led the Fed through the global financial crisis in 2008, will be in Japan next week. It has been arranged for him to meet officials including Abe and Bank of Japan Governor Haruhiko Kuroda, according to a government official speaking on condition of anonymity.

Bernanke is expected to discuss Brexit and the BOJ’s negative interest rate policy with Abe and Kuroda, the official said.

Some market players speculate Kuroda might decide, in a surprise, to provide “helicopter money” – a term coined by American economist Milton Friedman and cited by Bernanke, before he became Fed chairman, when talking about how central banks might finance government budgets as a way to seek to fight deflation.

As well, Larry Summers wrote late last week in the Washington Post:

The Fed-funds futures market provides a window into market thinking regarding the likely path of monetary policy. Remarkably, the market does not now expect a full Fed tightening until early 2019. This is despite all the Fed speeches expressing optimism about the economy and a desire to normalize interest rates.

I believe these developments all reflect a growing awareness of the importance of the secular stagnation risks I have highlighted over the last several years. There is a growing sense that the world is demand-short — that the real interest rates necessary to equate investment and saving at full employment are very low and often may be unattainable given the bounds on nominal interest rate reductions. The result is very low long-term real rates, sluggish growth expectations, concerns about the ability even over the fairly long term to get inflation to average 2 percent, and a sense that the Fed and the world’s major central banks will not be able to normalize financial conditions in the foreseeable future.

Having the right worldview is essential if there is to be a chance of making the right decisions. Here are the necessary adjustments:

First, with differences between countries, neutral real interest rates are likely close to zero going forward. Think about the U.S., where growth has been relatively robust by recent standards. Growth has averaged little more than potential for the last one, three or five years while the real Federal funds rate has been about -1 percent.  There is no good reason to think given sluggish investment expectations that the neutral rate will rise to be significantly positive in the foreseeable future. The situation is worse in other countries with more structural issues and slower labor-force growth. Substantial continued reductions in Fed estimates of the real neutral rate lie ahead.

Second, as counterintuitive as it is to central bankers who came of age when the inflation of the 1970s defined the central banking challenge, our problem today is insufficient inflation. In the U.S., Europe and Japan, markets are now expecting inflation that is below target even with full employment over the next 10 years. This is despite a 70 percent rise in the price of oil. Evidence from markets and some surveys suggests that inflation expectations are becoming unhinged to the downside. The policy challenge with respect to credibility is exactly the opposite of what it has been historically — it is to convince people that prices will rise at target rates in the future.  This is likely to require some combination of very tight markets and mechanisms that give confidence that during the best times, inflation will be allowed to exceed target levels so that over the long term, they can average target levels.

Third, in a world where interest rates over horizons of more than a generation are far lower than even pessimistic projections of growth, traditional thinking about debt sustainability needs to be discarded.  In the U.S., the U.K., the Euro area and Japan, the real cost of even 30-year debt will be negative or negligible if inflation targets are achieved. Indeed, the conditions Brad DeLong and I set out in 2012 for expansionary fiscal policy to pay for itself are much more easily satisfied today than they were at that time.

Fourth, the traditional suite of structural policies to promote flexibility are not especially likely to be successful in the current environment, though some structural policy approaches such as removal of restrictions on investment are still desirable.  Indeed, in the presence of chronic excess supply, structural reform has the risk of spurring disinflation rather than contributing to a necessary increase in inflation.  There is, in fact, a case for strengthening entitlement benefits so as to promote current demand.

These are the monetary titans of our times  shifting radically towards various new forms of stimulus. Resistance to them is likely still to be strong on Western economic institutions but it is Japan that has led the world into the deflationary era and it is in Japan that the next phase of monetary innovation is likely to be pioneered.

Australian investors need to bear this mind because if Japan were to move to the direct monetary financing of infrastructure so soon after its NIRP experiment then the same will follow to other countries as some stage. The implications are:

  • the yen ought fall given it is a resumption of the expansion of the monetary base;
  • that will, in turn, defeat Japan’s reflationary goals given it will weigh on commodity prices;
  • however, if, in the longer run, probably after the next global shock, such policies were to be adopted on a widespread basis then it could well be good for commodity prices given the forex effects would net out and demand rise for building materials;
  • this could present an especially attractive solution to Europe – if the Germans could get over themselves – given it could finance all kind of modernising investments in its weakest and most troubled states, finally offering a carrot as well as stick to structural reform foisted upon them from the core, and taking pressure off governments from secessionist movements.

I don’t think that small markets like Australia could ever do it, just as none has done QE, given the currency impacts could be enormous. So I don’t think it has much relevance to the current national discussion about twin deficits and sovereign ratings. But if it were to be adopted in the major economies it would not necessarily need to be taken up here anyway given we’d directly benefit from the commodity price spillovers.

The bottom line is that the helicopter monetarists are right and the sooner the world moves to a new form of ‘deleveraging stimulus’ the better.

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  1. jgordon

    Having read and greatly admired Akumetsu, I have to say that this is a mistake. The best cure for the crisis would be a wholesale decapitation of the crooks in charge along with a complete reboot of the system. Everyone gets wiped out and we all start over anew, hopefully with a completely different and humane way of organizing things.

    Infrastructure spending? Maybe in some ivory tower theoretical model that would work, but in the real world of today that’s just another enabler of corruption and extend and pretend.

    1. Alex Hanin

      Well maybe you don’t have anything to loose, but most people would rather avoid a big crash. And I don’t see how we would just ‘start over anew’ in a ‘human way’ after that.

      I think ‘helicopter money’ is the obvious solution. Yes, there would be corruption, there already is a lot of corruption, it’s the real world we’re talking about. That shouldn’t prevent us from doing what’s right.

    2. Skippy

      Manga and mortgages… ?????

      Disheveled Marsupial…. careful with that – best cure – thingy…

      1. jgordon

        Regardless of the medium, Akumetsu is enlightening and inspirational. More people should acknowledge and appreciate the constructive use of violence in our affairs. Actually I think this may be the key reason why economic theories are so lame and half-baked. They pretend that this vital aspect of human nature doesn’t exist, and so their models always go haywire when it counts most.

        1. Skippy

          You lost me at – best cure – and compound it with – is – enlightening and inspirational… then go the full Monty with “More people – should – acknowledge and appreciate the constructive use of violence in our affairs…..

          I think you missed the party boat some time ago jgordon…. people – have – acknowledge and appreciate the constructive use of violence in our affairs_right_now and right back to the 70s… Some say that is when neoliberalism became dominate…

          Disheveled Marsupial…. be careful with Manga… it can be a bit like Rand… first step free falling into the narrative can be timeless….

        2. different clue

          The problem with resorting to constructive violence is that someone else may be better at constructive violence than you are. I believe that may be why military analysts with genuine personal warfighting experience sometimes refer to resorting to constructive violence as “rolling the iron dice.”

          I won’t be the first person in MY neighborhood to take a chance on rolling the iron dice.

      2. ambrit

        He might mean Chanbara for Chumps.
        The simile might be inexact since our Glorious Reptilian Overlords didn’t say “Prepare to die,” in proper Samurai form, before consigning the Ninety Nine Percent to Perdition.

        1. Skippy

          My handle is derived from an old Oz TV show called Skippy, used by another comedy show in reference to a skit called Skippy and the White Slave Traders.

          The Disheveled Marsupial bit is in reference to the thousands of hours spent in close proximity to a cornucopia of ideological purists and assorted sociopolitical or econnomic breathers…. over the years… leaving one feeling a wee bit disheveled….

          Disheveled Marsupial… reference above… is jgordon observing reality or just using someone else optics to define reality…. some just seem to desire rapture thingy… emotively…

    3. washunate

      wholesale decapitation of the crooks in charge

      Yep. Funny how increasing the quantity of the money supply is always the answer, no matter what the question.

      Enforcing rule of law? What’s that? That’s not related to capitalism and democracy and freedom!

      1. MyLessThanPrimeBeef

        Because the rich get the new money and you and me, sorry, you and I, don’t.

        So, of course, more money is the answer.

        And seppuku is feudal. General MacArthur gave the Japanese democracy some sixty years ago.

        No more seppuku.

        And as Marlon Brando said in Tea House in the August Moon, (we Japanese believe – Brando played Sakini) pain makes man think.

        So, again, more money.

          1. MyLessThanPrimeBeef

            We need Lunar Economy or Martian Economy.

            With both, there is much less gravity.

            So, no one is down.

            Everyone is on same plane, more or less.

            And money doesn’t trickle down in such a light gravity environment.

            It trickles sideways.

            1. so

              Like floating…..William Hurt in Altered States….Sensory deprivation tanks to float in money to alter your consciousness. To give you the FEELING of wealth.

              1. MyLessThanPrimeBeef

                Ah, to float in an ocean of money.

                So far, only the billionaires can do that.

        1. Plenue

          Japan isn’t a functioning democracy. That was the initial goal but the US very quickly abandoned that plan as the Cold War started going. Eastern Germany looks dynamic compared to the subservient and static leadership of Japan.

    4. Plenue


      Now go read up on the Paris Commune. The leaders of Japan have the JSDF on their side. The only way any kind of violent revolution would succeed is if it got some portion of the military on its side, which is far more likely to happen if the protestors are unarmed. Taking violent action will merely get you labeled a terrorist and a dangerous threat against which violent suppression will be a much easier sell. Revolutions succeed when troops refuse to fire on unarmed civilians and switch sides.

  2. Robert Hahl

    Aren’t negative interest rates a new kind of regressive taxation? Those who can afford to trade bonds get capital gains, those forced to save bonds get loses.

    1. ben

      Negative interest rates are financial repression. You cannot save in a bank so you are forced into riskier assets.

    2. cocomaan

      My nightmare scenario is that NIRP coincides with the banning of paper cash. It will happen under the auspices of national security, but will have a dual purpose.

      Now you can’t store money under a mattress anymore, you must spend it.

      It won’t go over well. In fact, it will be a disaster in a country as rural as America. In the meantime, I expect alternative currencies to spring up. Precious metals will be a no-brainer, of course, but I mean that people will continue to trade in paper currency long after the bank stops accepting it.

    3. Russell

      Right. As the ship sails it is lightened if running on oil.
      Higher in the water. Rouge wave and it rolls over.
      Watch This!
      Two percent from all allies on army build & material.
      War works for both Empire & China.
      ECON war& no headway.
      War mean headway.
      Least ways overall slow crash makes no inheritance left.
      Except for 147.

  3. OpenThePodBayDoorsHAL

    Your arm is a bright green gangrenous color. You could decide to a.) amputate your arm so it doesn’t spread, or b.) paint the rest of your body green so it matches.
    “Please do not worry”.

  4. Sound of the Suburbs

    To try and keep this polarising. neoclassical economics going the only solution looks like helicopter money.

    Neoclassical economics assumes raw capitalism will reach stable equilibriums that benefit the majority.

    The Euro-zone works on this assumption and we see the rich nations get richer and the poor nations get poorer. We then use austerity on the poorer nations to exacerbate the problem.

    Has raw capitalism ever helped the majority?

    We had small state, raw capitalism in the 19th Century, the wealthy lived in the lap of luxury and the poor lived in abject squalor. The vast majority were poor.

    To maximise profits the wealthy used slave and child labour and only gave them up when regulations were put in place and they were compensated for the loss of their slaves.

    Only through organised labour movements did the workers get a larger slice of the pie and it had nothing to do with raw capitalism itself.

    Neoclassical economics was in use in the 1920s and its raw capitalism again led to massive inequality.
    The wealthy had so much money to invest they got drawn into wild speculative bubbles. The Wall Street Crash and the Great Depression came next.

    Today everything is polarising again with massive inequality, with such subdued demand everyone is struggling.

    How much longer can we believe in this neoclassical nonsense?

    In a world drowning in investment capital, negative interest rates have to be used to try and keep the stuff away.

    Demand is so subdued there is nothing productive worth investing in and so people are willing to pay to have somewhere to park their money.

    Get the impression things have gone too far?

    To try and keep this polarising economics going the only solution looks like helicopter money.

    1. Yata

      They simply replaced a portion of the endless supply of cheap labor with a fiat currency.
      The streets were never paved with gold, by the way.
      Now the ruse has reached a more critical juncture, calling for an even more potent remedy.
      All for the want of the simple need to introduce the necessity of loss in an equitable fashion.
      They burn the fields and rotate crops for essentially the same reasons.

  5. washunate

    These are the monetary titans of our times shifting radically towards various new forms of stimulus.

    Are you thinking of a particular subset of policy choices? From where I sit, the past couple decades, in aggregate, has been a time characterized precisely by ever more, uh, creative forms of stimulus. This doesn’t sound like a change of course. This sounds like Larry Summers defending bailouts of [insert specifics here].

    Our problem today is insufficient inflation? You have to be an incredibly out of touch, affluent intellectual to spout such comedy.

      1. washunate

        It’s funny, they always forget to include that clarification. I’m sure it’s an honest oversight.

          1. washunate

            My apologies, I was being sarcastic there. Things are so warped in our discourse perhaps it wasn’t as apparent as I had assumed.


            I think this is really important, so in all seriousness, I really don’t get the positioning over this. There is nothing new going on, no change of heart, no radical realignment. The basic quantity theory of money has been driving policy for a long time, and it is fundamentally flawed. (Basically, QToM says that changes in the amount of currency is what primarily drives spending decisions, and that more generally, the value of money is determined by the amount of it. I find that inconsistent with reality, both theoretically and empirically, yet it infects almost all establishment economic thinking, both left and right).

            Even leftist academic theories that present themselves as disagreeing with the mainstream, like MMT (Modern Money Theory), embrace mainstream thought in refusing to reject the underlying premise that the quantity of money is of primary importance.

            Rather, I would argue, what matters in a sufficiently wealthy nation is how money is spent. It’s the return on the investment, the productive output, that matters. It’s a question of distribution, not aggregates. Quantity is a secondary factor that in most contexts is essentially irrelevant. Inequality, not insufficient inflation, is the core economic challenge of our time.

            After all, as you allude, Summers was part of the Committee to Save the World by Bailing out Criminal and Incompetent Banksters. How’s that working out for us? We’ve pumped trillions of dollars into the global financial system in the Reagan-Obama era (or perhaps we should go back to the London Gold Pool, and say over the past half century).

            1. jsn

              MMT doesn’t embrace the quantity theory, it distinguishes clearly the relationships between money, its distribution and velocity with regard to real resources and real resource constraints. Quantity only has any effect if it affects real things and once it does its effects are not linear, they do not conform to the quantity theory. Balance sheets do respond to some extent linearly as we see in the sustained financial asset bubbles of the last thirty years, but this is all nominal wealth that exists only on balance sheets and mostly as fictional claims on prior bad debts as yet to be written down, that every time it is traded should be viewed as fraudulent.

              What we’ve seen the last thirty years is ever more creative ways to use the word “stimulus” without actually providing one.

              Stimulus, fiscal distributions to humans who spend money on needs, has been avoided in every conceivable way: that it might happen as a result of financial manipulations has been viewed as an acceptable accident that can be corrected by raising interest rates in the event any such effect is seen in aggregate prices. In order that the fictional valuations of purely financial assets can be sustained we continue to call all kinds of balance sheet manipulations “stimulus”, discrediting the thing the real economy needs most.


              1. washunate

                From Wray’s piece. MMT (at least as he and Mosler advocate it) does not reject the underlying premise of buffer stock policy. Rather, they say that the rightwing monetarists are using the wrong one.)

                The mainstream view has long been that “full employment” and “price stability” are incompatible goals. They claim that you must have substantial unemployment to keep prices in check. You can call it NAIRU, you can call it the “natural rate” or you can call it the “reserve army of the unemployed”. It is a view shared by virtually all economists outside the MMT camp. According to all of them, the unemployed serve as a price anchor; the suffering of the unemployed does the duty of keeping the currency scarce and valuable. Unemployment is the “cost” to achieve the “benefit” of low inflation.

                We reject that view as unnecessarily defeatist.

                However. And here’s the Big However. We do agree with the mainstream that you need a price anchor, or otherwise pursuit of true, full employment probably would, at least much of the time, cause inflation. So, we, too, want a price anchor. We object to the (usually implicit) claim of just about everyone outside the MMT camp that unemployment is the only possible price anchor. Other economists do not have the imagination to come up with any alternative price anchor for a fiat currency.

                In our view, that is wrong.

                Here is Warren Mosler’s response, in what is almost a Haiku in its simplicity:

                It comes down to this:

                With ‘state currency’

                There necessarily is,

                Always has been,

                Always will be,

                A buffer stock policy.

                Call that the MMT insight if you wish.

                1. MyLessThanPrimeBeef

                  Unemployment as one price anchor.

                  Buffer stock policy as another.

                  Does he say what his buffer stock policy is, and how that is not unemployment?

                  1. washunate

                    Ah, if I think I follow your question, Mosler posits that you have to pick some kind of buffer stock policy. Buffer stock is the overarching approach. Unemployment (NAIRU) is one specific type. Other types include full employment (JG/ELR/PSE), gold, silver, copper, wheat, soybeans, salt, really anything you can imagine.

                    Within that framework, I heartily agree with Wray and Mosler that JG is the best choice.

                    What I find interesting is how hesitant Wray, Mosler, and others are to considering alternatives that exist outside of monetary policy. Non-monetary policy ideas that don’t center around price stability but rather focus on meeting social needs, such as basic income, universal unemployment insurance, and universal health insurance, seem to threaten their entire worldview.

                    1. Don W.

                      Most MMT I have seen, even with JG, include unemployment insurance because it doesn’t make sense for all unemployed to move directly to JG. And, usually include universal health care as something that makes sense as a public good. I think they shy away from universal basic income due to more of a belief in the personal and societal benefits of a job.

                      My own iterpretation of JG is to focus on expanding the commons to everyones benefit and the consideration that it doesn’t take many people to make our stuff anymore. Therefore, I would start with research, parks (national and local), libraries, schools, and an Apollo project to get off fossil fuels. But, that is just me.

                2. jabawocky

                  Full employment will lead to high inflation only in the absence of growth. If supply can be increased to meet the new demand, inflation will not rise.

                  Lack of supply is the cause of inflation, likewise lack of demand causes deflation. Changing the money base has temporary effects at best, and it is important not to confuse these with real effects.

            2. Left in Wisconsin

              Even leftist academic theories that present themselves as disagreeing with the mainstream, like MMT (Modern Money Theory), embrace mainstream thought in refusing to reject the underlying premise that the quantity of money is of primary importance.

              So I read the entire Wray piece linked (which was primarily about JG and why it isn’t inflationary) and I, perhaps naively, did not see that “the quantity of money is of primary importance.” The claim I saw, which seems similar to your own view, is:

              What this means is that with a JG in place, the inflation-fighting adjustments to spending will occur among the employed rather than by causing unemployment and poverty. In other words, the costs of fighting inflation can be made to be borne at higher income levels. We are surprised that our critics appear to prefer to use unemployment and poverty to fight inflation, which forces the least able to bear more of the costs.

              That suggests an emphasis on addressing inequality rather than simply shoving more dollars into the system.

                1. washunate

                  Hey, I wrote a longer note to Left in Wisconsin, but FYI, that post at NEP is not talking about what I’m talking about in Wray’s post.

                  In fact, if anything, that post is supportive of spending on non-work, which undermines what Wray and Mosler have been describing :-)

                  The size of the pie increases and decreases with the number of people demanding pie.

                  So what’s wrong with basic income, then? Or universal unemployment insurance? Or universal health insurance? Why do we need a JG at all if we’re not worried about inflation?

                  1. Left in Wisconsin

                    Why do we need a JG at all if we’re not worried about inflation?

                    I can’t say whether the MMT’ers see the answer to this question outside “economics” (as having to do with quantities and prices) but I certainly do. To me, 3 core reasons for a JG:
                    1. Jobs provide dignity to humans that is otherwise hard to come by. (I am not arguing that this should be the case, only that it is.)
                    2. While there is concern in some quarters that we are running out of work, I would argue that we a huge amount of (social) work that needs to be done – preparing for/adapting to climate change for one; all kinds of care work for another. Why pay people who want to work not to work when we can pay them to do socially productive work?
                    3. Unemployment does work to hold wages down, which is a bad thing.

                    Also, universal health insurance is not an alternative to a JG; it is a supplement. (Again, speaking for myself, not MMT’ers>)

                    1. MyLessThanPrimeBeef

                      Jobs provide dignity.

                      I agree.

                      Work also provides dignity (some have said it’s work and not jobs – I just assume when they say jobs, they mean work).

                      The question then is, what is work?

                      Caring for one’s aging parents – is it not work?

                      That’s one sample question.

                      We can ask that more broadly – what is work?

                    2. washunate

                      I’m right with both of you. I think this is a great discussion. I completely agree that the government should employ workers (indeed, the government already directs billions of labor hours annually).

                      What I find interesting is that this is not the kind of discourse the main proponents of MMT engage. First, they present JG as the sole program, rather than one public option among several. Second, they link social problems to unemployment (like lack of access to healthcare) that many of us would argue should be separated from employment. Third, they depend upon public policy entrenching inequality to maintain price stability. JG workers must be paid less than, say, DEA agents or econ profs or hospital administrators or other public employees, otherwise the price stability mechanism they believe in would crumble. In addition to wage inequality, there is also the distributional problem of what people do. MMT authors often presume that we need more activity in aggregate without analyzing what activity is already happening that is wasteful. Healthcare again is a good example, since a single payer system would actually provide universal coverage with less work, not more. And MMT almost completely ignores the national security state, a huge waste of labor on a colossal scale.

            3. myshkin

              Don’t we need to know where is the drop is made, roughly speaking, Wall Street or Main Street?

              Thanks to globalization, M&A and mass production, “most of these markets are permanently in surplus production. The need is not to invest but to prop prices up.”
              -JR Saul

              “In the late 19th C, there was less than one cent’s worth of M&A for every dollar of ‘real’ investment. Fast forward another hundred years and for every one dollar of ‘real’ investment there were over two dollar put into mergers.”
              -Jonathan Nitzan and Shimshon Bichler

              Should the “trade between subsidiaries of the same transnational be counted as trade” at all? “If it isn’t trade, we shouldn’t expect it to have the effect of trade. Perhaps its effect is neutral or even negative. If we don’t honestly ask the question, we cannot begin to understand the disjunct between massive trade and sluggish growth.” JR Saul

              What might be wrong with helicopter money as long as it goes directly to ‘the’ people and not a trickle down? In the current rabbit hole economic circumstances we’ve burrowed into, the TPTB after trying everything but fiscal stimulus, might try something that works, though within the narrow range of the middle and lower classes of the developed economies.

              The other usually unaccounted and ignored factors beyond those typically associated with the peculiar economic institution corporate globalism has unleashed are the limits to growth that 7 billion humans are bumping up against and the obscene disparity of income and wealth distribution.

        1. cnchal

          What’s funny is bringing Ben out of mothballs. One of the guys that drove us into the ditch is giving driving lessons in Japan.

            1. oh

              Didn’t US tell Japan to spend on lot of “bridges to nowhere” to get them out of the lost decade sometime in the late nineties? And surely it worked! Now they’re back to listening to the same bad drivers. ii desu ne!

              1. Synoia

                It is a Chronic addiction to Group Think.

                Such an addiction avoids having to think hard, reject theories which fail their proof tests, and upset the boss.

  6. KYrocky

    There is a growing sense that the world is demand-short —

    Larry Summers 1 week ago? This has been the case since before Obama took office, but completely ignored by our supply-side inflation confidence fairy elites. Insufficient inflation? Those whose concerns are only for the rich have peddled this fiction for at least 8 years. THERE IS NOT ENOUGH DEMAND. Facts, reality and history do not matter to this ilk. They have their theories which are prognosticated in such confident solemn tones, but which time has proven exist only to drive money to the banks and the rich.

  7. Pepe Aguglia

    The author is not very well informed. First off,

    the yen ought fall given it is a resumption of the expansion of the monetary base

    Japan’s monetary base has been expanding uninterruptedly since Kuroda took over the BOJ and continues to do so at an Y80trn annualized rate, so there’s no “resumption.” Additionally, helicopter money need not expand the monetary base. One means of deploying helicopter money that is reportedly under consideration in Japan is swapping some of the BOJ’s existing JGB holdings for non-interest-bearing perpetual bonds. Such swaps would leave the monetary base unchanged.

    that will, in turn, defeat Japan’s reflationary goals given it will weigh on commodity prices;

    This is backwards. A weaker yen is domestically inflationary and vice versa. Yen depreciation results in higher commodity import prices in particular.

    1. timbers

      “This is backwards. A weaker yen is domestically inflationary and vice versa. Yen depreciation results in higher commodity import prices in particular.” Thank you for this. When I read this I double and triple read it because I thought exactly the same thing. I’m glad I was not hullucinating.

  8. beene

    If we want real change we need to end those who sell the idea that bankers (FR, IMF, money changers, etc.) can create a stable currency threw debt. History show us that these groups always bankrupt the nations they operate. Eventually by the nation owing more in interest than the principle debt.

  9. Blurtman

    The rain is falling through the mist of sorrow that surrounded me.
    The sun could never thaw away the the bliss that lays around me.

    Let it rain, let it rain,
    Let your love rain down on me.
    Let it rain, let it rain,
    Let it rain, rain, rain.

    Her life was like a desert flower burning in the sun.
    Until I found the way to love, it’s harder said than done.


    Now I know the secret; there is nothing that I lack.
    If I give my love to you, you’ll surely give it back.

  10. Tim

    Helicopter money would be a wonderful turn of events! It’s the only FAIR way MMT should be implemented.

    On a dollar per citizen basis it would spread the benefits (more cash, and spending and jobs) and cost (inflation stealth tax) evenly throughout society. Not this Quantitative easing that benefited the FIRE industry with cheap money and left people with the bill (massive stealth taxes and stagnant wages).

    I went camping this weekend, spending time around lower middle class folks and it is heartbreaking how difficult life has become for them.

  11. Tony Wright

    All this goes to further illustrate that the value of money is largely arbitrary. Real wealth is twofold:
    1. The biodiversity of the planet, which is renewable if we let it. However this is under serious threat as we humans are creating the sixth great extinction of the history of the planet with 30 percent of species made extinct over the last 40 years according to WWF. And extinction is forever, whereas new species do not arise overnight.
    2. The mineral and fossil fuel wealth under the ground , which we are depleting at an increasing rate as if there is no tomorrow. You can only dig it up once though.
    So we need to start listening to the biologists, rather than just the economists, accountants and lawyers.

  12. Buck Eschaton

    Whenever I hear helicopter money I get excited, maybe I can use some of it to pay down my mortgage and credit cards. Maybe use some for house repairs and improvements. Pay down the car loan…but then I’m disappointed because apparently it’s just banks that are going to have money dropped on them again, I’m just a plebe so I don’t really understand how this will help anybody but I’m not an expert at these things.

  13. gordon

    “Fourth, the traditional suite of structural policies to promote flexibility are not especially likely to be successful in the current environment…”

    This has got to be the gentlest, sweetest way of saying supply-side economics is voodoo that I’ve ever seen!

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