THE ROAD TO CONFETTI

Guest Post by Jim Grant

Ben S. Bernanke, the former Fed chairman turned capital-introduction professional for Pimco, keeps his hand in the policy-making game with periodic blog posts. He’s out with a new one about “helicopter money,” the phrase connoting the idea that, in a deflationary crisis, the government could drop currency from the skies to promote rising prices and brisker spending. Attempting to put the American mind at ease, Bernanke assures his readers that, while there will be no need for such a gambit in “the foreseeable future,” the Fed could easily implement a “money-financed fiscal program” in the hour of need.

No helicopters would be necessary, of course, Bernanke continues. Let the Fed simply top off the Treasury’s checking account—filling it with new digital scrip. The funds would not constitute debt; they would be more like a gift. Or the Fed might accept the Treasury’s IOU, which it would hold “indefinitely,” as Bernanke puts it, rebating any interest received—a kind of zero-coupon perpetual security.

The Treasury would then spread the wealth by making vital public investments, filling potholes and whatnot. The key, notes Bernanke, is that such outlays would be “money-financed, not debt-financed.” The “appealing aspect of an MFFP,” says he, “is that it should influence the economy through a number of channels, making it extremely likely to be effective—even if existing government debt is already high and/or interest rates are zero or negative [the italics are his].”

Thus, the thought processes of Janet Yellen’s predecessor. Reading him, we are struck, as ever, by his clinical detachment. Does the deployment of helicopter money not entail some meaningful risk of the loss of confidence in a currency that is, after all, undefined, uncollateralized and infinitely replicable at exactly zero cost? Might trust be shattered by the visible act of infusing the government with invisible monetary pixels and by the subsequent exchange of those images for real goods and services?

The former Fed chairman seems not to consider the question—certainly, he doesn’t address it. To us, it is the great question. Pondering it, as we say, we are bearish on the money of overextended governments. We are bullish on the alternatives enumerated in the Periodic table. It would be nice to know when the rest of the world will come around to the gold-friendly view that central bankers have lost their marbles. We have no such timetable. The road to confetti is long and winding.

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Wip
Wip

If a person was to accept this type of thought, then just call government/elite/the Fed your one and only true God.

Iconoclast421
Iconoclast421

Or the Fed can just wait until all their friends are sitting on $300 billion in bad auto loans that they bought for 12 cents on the dollar and then swoop in and buy them all for 100 cents on the dollar. BOOM, $250 billion in instant profits. Those profits can then be used to buy up stocks and yachts and Teslas which will help the economy.

Westcoaster
Westcoaster

Glad to see Mr. Grant is coming around to the consensus reached long ago by the gentry; Bernanke is coo-coo.

VegasBob
VegasBob

Bernanke is a shifty-eyed goddamn liar.

He should be swinging at the end of a rope for crimes including counterfeiting, fraud, and grand theft, just to name a few for starters.

Why anybody still listens to this pathological liar mystifies me.

BUCKHED
BUCKHED

If Bennie’s dumb ass idea’s worked why wouldn’t he propose that the Treasury send every tax payer a 100K check…that would boost the economy…NOT !

AC
AC

Why not just revoke the Fed’s charter, and have the Treasury issue interest-free Treasury Notes?

Like Andrew Jackson did. Just before his attempted assassination.

Rise Up

…such outlays would be “money-financed, not debt-financed.”
—————-
Money IS debt, idiot!

Purplefrog
Purplefrog

The idea of “helicopter money” as a solution to a comatose econony reminds me of the proposed solution for combating the German U-Boats; that is, to increase the temperature of the oceans to the boiling point.

Marco
Marco

Eliminate the payroll tax, this would be are 15 percent reduction in taxes for working people. Their paycheck would get bigger and small businesses would be more profitable instantly.
Strike the social security debt from the books and pay with fiat money. This plan would still incentivize work and not enrich speculators. Debt based money only appears to work when the economy is growing enough to cover the interest, else the supply of money contracts.

John Pallyswine
John Pallyswine

HiTliary is an evil muSSlim wASSp like all the rest.

A good muu is one boiled in pig blood.

HiTliary made a speech at CFR saying that iSSlam is peace and milk and cookies.

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