Monday, January 26, 2009

Litterally throwing money out of helicopters

John Hempton, over at Bronte Capital is on my blog rool and I usually like his commentary. This time however he has gone over the deep end with an entry titled "why the federal reserve should literally throw money out of helicopters".

The gist of it is simple and I have covered it here many times, the money supply and velocity is shrinking by deleveraging and hoarding of the private sector, so the public sector is trying to re-inflate some with QE/printing presses and some argue that "it ain't enough" so the outlook is still deflationary. The only way out of the liquidity trap, where people hoard cash in deflationary expectations is to create inflationary expectations by ... yes, litterally throwing cash out of helicopters.

I find the post frankly hilarious. Of course the same effect is achieved with tax cuts but they would cost more than 2B.


Andrew Meyer said...

A more interesting approach would be to have governments issue scrip.

What is particularly interesting about scrip, is that it can be modified so that people are taxed for not using it. Essentially it is cash which cannot be invested or horded. If someone get's scrip, they must use it to buy something or else it decreases in value.

There have been a couple cases where it's been used recently. Somewhere in Germany that I'm too lazy to look up. They started using it to benefit local businesses and because they don't like the Euro.

If you want to increase the velocity of currency, rather than dropping dollars, why not give tax refunds in a form of modified scrip?

You get the scrip and have 3 months to use it. If it's not used, it drops in value by 25% each quarter.

MC-Shalom said...

You Bail Them Out, We Opt Out. We Want Some TARP

Dear, I should say Expensive Chairman Ben S. Bernanke,

All of Our Economic Problems Find They Root in the Existence of Credit.

Out of the $5,000,000,000,000 bail out money for the banks, that is $1,000 for every inhabitant of this planet, what is it exactly that WE, The People, got?

If my bank doesn't pay back its credits, how come I still must pay mines?

If my bank gets 0% Loans, how come I don't?

At the same time, everyday, some of us are losing our home or even our jobs.

Credit discriminates against people of lower economic classes, as such it is unconstitutional, isn't it? It is an supra national stealth weapon of class struggle.

Credit is a predatory practice. When the predator finishes up the preys he starves to death. What did you expect?

Where are you exactly in that food chain?

Credit gets in the way of All the Principles of Equal Opportunity and Free Market.

Credit is a Stealth Weapon of Mass Destruction.

Credit is Mathematically Inept, Morally Unacceptable.

You Bail Them Out, We Opt Out

President Bush Proposed the TARP, Senator Obama Voted It.

We Want Some TARP.

Opting Out Is Both Free and Strictly Anonymous.

My Solution: The Credit Free, Free Market Economy.

Is Both Dynamic on the Short Run & Stable on the Long Run, The Only Available Short Run Solution.

I Am, Hence, Leading The Exit Out of Credit:

Let me Outline for You my Proposed Strategy:

My Prescription to Preserve Our Belongings.

Our Property Title: Our Free, Strictly Anonymous Right to Opt Out of Credit.

Our Credit Free Money: The Dinar-Shekel AKA The DaSh, Symbol: - .

Asset Transfer - Our Right Grant Operation - Our Wealth Multiplier - Our Liquidity TARP.

A Specific Application of Employment, Interest and Money.
[A Tract Intended For my Fellows Economists].

If Risk Free Interest Rates Are at 0.00% Doesn't That Mean That Credit is Worthless Already?

Since credit based currencies are managed by setting short-term interest rates, on which you have lost all control, can we still say that are managing?

We Need, Hence, Cancel All Interest Bearing Debt and Abolish Interest Bearing Credit.

In This Age of Turbulence The People Wants an Exit Out of Credit: An Adventure in a New World Economic Order.

The only other option would be to wait till most of the productive assets of the economy get physically destroyed either by war or by rust.

It will be either awfully deadly or dramatically long.

A price none of us can afford to pay.

“The current crisis can be overcome only by developing a sense of common purpose. The alternative to a new international order is chaos.”

- Henry A. Kissinger

What Else?

Until We Succeed the Economy Will Necessarily Keep Sinking Into a Deeper and Deeper Depression

You Bail Them Out, Let's Opt Out!

Check Out How Many of Us Are Already on Their Way to Opt Out of Credit.

If You Don't Opt Out Now, Then When Will You?

Let me provide you with a link to my press release for my open letter to you:

Chairman Ben S. Bernanke, Quantitative [Ooops! I Meant Credit] Easing Can't Work!

I am, Mr Chairman, Yours Sincerely [As if I really had the choice.],

Shalom P. Hamou AKA 'MC-Shalom'
Chief Economist - Master Conductor
1 7 7 6 - Annuit Cœptis
Tel: +972 54 441-7640
Fax: +972 3 741-0824

Marcf said...

Andrew, very interesting. Thanks for the Scrip link. It is essentially a money that doesn't have a store value and so has constant velocity, or at least non-decreasing. Interesting, you bypass the deflationary feedback loop.

MC-Shalom, your site is great and your heart in the right place. But seriously credit is a good thing. Too much credit a bad thing. Let's not throw the baby with the bath water. You got a ROTFLOL from me on the ben bernanke explaining QE to the masses with the fat pig. Shoot the pig.

Juha Lindfors said...

They just tried the voucher experiment in Taiwan before the New Year.

No idea yet if it helped or not but for certain the money is not going into mattresses (given the expiration state) or to fill up balance sheets.

And on the other hand it supports directly those companies consumers want to survive via "vote with your wallet", rather than a result of lobbyists, etc.

It is an interesting experiment. Downside so far has been that the vouchers are easier targets for forgery.

Marcf said...

forgery... punishable by death, except if you are the government of course.

There was a proposal in the FT that was similar, another advantage of the money that will self destruct is that you can in fact go into negative territory on rates because paper is not a permanent store of value anymore, nothing is. Very interesting will dig and blog.

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