Stalled global economy and helicopter money

21 comments on “Stalled global economy and helicopter money ”

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1. tinfoilhat 1

   20 April 2016 at 10:22 am

   “What is needed is major reform – and an end to the illusion of perpetual growth.”

   This has been obvious for some time, however, I’m not holding my breath waiting for any of the mainstream political parties around the world to change their business as usual agendas.
2. Colonial Viper 2

   20 April 2016 at 10:34 am

   “Helicopter money” – a term introduced by Milton Friedman, what a great guy.
3. Steve Alfreds 3

   20 April 2016 at 10:35 am

   Sorry about the definition coming from wikipedia, but the last sentence sums things up nicely:

   “A liquidity trap is a situation, described in Keynesian economics, in which injections of cash into the private banking system by a central bank fail to decrease interest rates and hence make monetary policy ineffective. A liquidity trap is caused when people hoard cash because they expect an adverse event such as deflation, insufficient aggregate demand, or war. Common characteristics of a liquidity trap are interest rates that are close to zero and fluctuations in the money supply that fail to translate into fluctuations in price levels.”

   The neoliberals, as I understand it, have denied it for years and as a result helicopter money is their last gasp attempt to save face.

   http://www.brookings.edu/~/media/projects/bpea/1998%202/1998b_bpea_krugman_dominquez_rogoff.pdf
   • RedLogix 3.1

     20 April 2016 at 10:54 am

     Or my father who taught this subject for some years once told me; in the Great Depression most people still had a quid or two in their back pocket. They just wouldn’t spend it because they were not sure where the next one was going to come from.

     Debt saturation has a similar effect. In a system that relies on credit creation for growth, there comes a point where business and consumers refuse to take on more debt, which stalls growth.

     Of course the solution is to change the system so as it is not dependent on perpetual debt … but that will never happen until the people profiting from it are removed from power.
     • Colonial Viper 3.1.1

       20 April 2016 at 11:24 am

       Of course the solution is to change the system so as it is not dependent on perpetual debt … but that will never happen until the people profiting from it are removed from power.

       And the people profiting from it, and who wield the real power, are not elected officials. The politicians have tended to be reduced to the level of functionaries and system administrators.
     • Draco T Bastard 3.1.2

       20 April 2016 at 12:54 pm

       Or my father who taught this subject for some years once told me; in the Great Depression most people still had a quid or two in their back pocket. They just wouldn’t spend it because they were not sure where the next one was going to come from.

       Which is why the UBI works as the main source of money for the economy while bank created credit doesn’t. Everyone has income and so will be willing to spend.
   • Phil 3.2

     20 April 2016 at 12:21 pm

     . A liquidity trap is caused when people hoard cash because they expect an adverse event such as deflation, insufficient aggregate demand, or war.

     There’s a case to be made that banks themselves had been in something of a liquidity trap post-GFC. For example, the TARP funds provided to US banks were not lent into the economy in the way the US Treasury hoped, because the banks were terrified of the potential size and scale of fines they might have to pay.
4. Kevin 4

   20 April 2016 at 11:33 am

   I am guessing the whole point of ‘helicopter money’ is to get people to spend into the economy?

   What if all they do is pay down debt?

   Doesn’t that defeat the whole purpose?
   • Phil 4.1

     20 April 2016 at 12:17 pm

     Doesn’t that defeat the whole purpose?

     Not at all. If people pay down debt today, then their disposable income goes up tomorrow (because they have lower/no debt-servicing interest cost) and you should end up with greater spending.
     • Kevin 4.1.1

       20 April 2016 at 2:13 pm

       Assuming the helicopter money covers all their debts…

       If it was me, I would pay down debt and any left over, save for a rainy day.
       • McFlock 4.1.1.1

         20 April 2016 at 3:10 pm

         Yeah, but that would require the debt to have been largely luxury, rather than being born of necessity when your income is not sufficient to cover sudden expenses.

         Many people will either pay down debt and spend at least some of their subsequent interest payments savings, or it will go straight towards buying the semi-essentials they’d put off such as new undies or longer-life lightbulbs to replace the incandescents that they can afford to buy now. Or smoke alarms.

         Some will definitely go to the banks, but they get the crumbs. OCR changes give the cash to the banks and the people get the crumbs.
5. Expat 5

   20 April 2016 at 2:16 pm

   It’s been quite apparent the US economy has been stuttering in the last week or so, the NZ and Aus dollar have climbed considerably against the greenback over this period, the US has been flat out printing money, but most of it has ended up in the hands of the wrong people to be of any benefit to the economy as whole, when will they learn that the solution lies in significant wealth redistribution.

   During the GFC, Aus govt paid every household a gift of $1000 to help stimulate the economy, and those on welfare received $1400, there were other packages as well’ but the important aspect was putting the money in the hands of the people who could keep the country afloat, Aus was the only western country to not go into recession, they’ve had nearly 25 years of continuous growth, but even that record may be broken if the planet continues on the economic pathway of failed measures, ensuring the 1% only benefit.
   • Colonial Viper 5.1

     20 April 2016 at 4:01 pm

     when will they learn that the solution lies in significant wealth redistribution.

     I’m pretty sure that “significant wealth redistribution” has been the plan and the action in the USA for the last 40 years.
     • Expat 5.1.1

       20 April 2016 at 6:27 pm

       Yes, but I’m talking Helen Clark style, you know the one, Key called it “Communism by stealth” and subsequently changed it, poor old working for families……..

       That’s why so many hate Clark, equality just isn’t fair on rich people……..
       • Colonial Viper 5.1.1.1

         20 April 2016 at 6:59 pm

         I wasn’t aware that inequality improved under Helen Clark. How are you measuring that?

         I suppose it might have levelled off from the bad trends of the Ruthanasia days, but it didn’t improve AFAIK except for maybe those in the top quartile.
         • Expat 5.1.1.1.1

           20 April 2016 at 8:38 pm

           Don’t you remember, lots of people had jobs, (in my local area, it was a historical low) lots more than they do now, a direct result of wealth redistribution to the many, and don’t forget about all the infrastructure investments, rebuilt the local hospital and added classrooms to all the local schools, something the “blue” seat hadn’t seen in decades.

           And don’t forget we had nine years of “not” a single beneficiary bashing incident (that’s because there weren’t many of them), sometimes you take it for granted, until you realise how the current Govt has made “hay” out it, and divided the country, blaming the poor for the countries poor economic performance.
6. Smilin 6

   20 April 2016 at 4:15 pm

   Growth now is a cover word for producing rubbish for the sake of it
   or advertising ramping up of the so called need for more growth
   If dairy farmers dont get paid enough for what they owe because their govt has conned them into thinking that their market will keep expanding with ever increasing profits and its obvious that their top dog position of 2yrs prior doesnt exist and wont ever be that good again because the competition got smarter and there is no more wars the size of GWBs bs Iraq and the axis of evil to lie to the nation that they need to keep producing at the great shit rate that was necessary to feed a war
   You get it ,add your own parts to the rest of it, a few hints :American Freedom Radio today- Fraud and our govt
   The real life and times of the ultimate con man aka uno hu
   Media works aka NZds Dick Cheney
   Look into this stuff and see why that we will never own our country again without a complete revolution because no matter what the present govt does to defraud us we will never have accountability to stop it
   We owe over half our GDP every year now Hello to the Chinese communist party our new govt
   • Colonial Viper 6.1

     20 April 2016 at 4:40 pm

     Strictly speaking its the Anglo American oligarchy which is our new government. The Chinese are just foreign traders that they are hawking us off to.
7. CoroDale 7

   20 April 2016 at 6:50 pm

   That sovereign money chopper shall also have to land a BNZ buy back. Anything less isn’t being honest about how far this scam has already gone.
8. Lucy 8

   20 April 2016 at 10:07 pm

   Why not just make corporations and rich people pay taxes in the country that they reside, if they reside in more than one country then each country gets a portion of taxes based on the amount of time they are there. There is no need for weird money choppers if everyone pays their share!
9. esoteric pineapples 9

   21 April 2016 at 8:56 am

   The underlying problem is that no one ever took the hit (written off the losses in their ledger) for the last crisis. The debt keeps on being passed around.

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