web analytics

Stalled global economy and helicopter money

Written By: - Date published: 10:08 am, April 20th, 2016 - 21 comments
Categories: capitalism, class war, economy, International, monetary policy - Tags: , ,

Printing money, which financial types like to call “quantitative easing”, has brought the global economy some time in what now looks like an ongoing crisis since 2008. But the buzz is wearing off – and there are calls for another fix:

Alan Greenspan: More QE Possible as Monetary Policy ‘Has Done Everything It Can’

Former Federal Reserve Chairman Alan Greenspan said current monetary policy has done everything it can without another round of quantitative easing.

“Monetary policy … has done everything it can unless you want to put additional QEs on,” he told CNBC.

“There’s no real evidence that we’re getting an impact on lending and on the economy picking up,” he said.

In a similar vein, see this interesting piece in The Guardian:

The bad smell hovering over the global economy

Attempts at economic stimulus have left a bad smell. Central banks are starting to think the unthinkable – helicopter money

Don’t be fooled. China’s growth is the result of a surge in investment and the strongest credit growth in almost two years. There has been a return to a model that burdened the country with excess manufacturing capacity, a property bubble and a rising number of non-performing loans. The economy has been stabilised, but at a cost. The upward trend in oil prices also looks brittle. The fundamentals of the market – supply continues to exceed demand – have not changed.

Then there’s the US. Here there are two problems – one glaringly apparent, the other lurking in the shadows. The overt weakness is that real incomes continue to be squeezed, despite the fall in unemployment. Americans are finding that wages are barely keeping pace with prices, and that the amount left over for discretionary spending is being eaten into by higher rents and medical bills.

The plan has not worked. There has been little impact on interest rates, banks have not increased their lending and the yen has risen on the foreign exchanges – the opposite of what was planned – because investors fear that the Bank of Japan is fast running out of ammunition. They have a point. Central banks, of course, swear blind that they are fully in control and that there is nothing to worry about. Perhaps not, but something doesn’t smell right. The fact that economists at Deutsche Bank published a helpful cut-out-and-keep guide to helicopter money last week is a straw in the wind.

As the Deutsche research makes clear, the most basic variant of helicopter money involves a central bank creating money so that it can be handed to the finance ministry to spend on tax cuts or higher public spending. There are two differences with QE. The cash goes directly to firms and individuals rather than being channeled through banks, and there is no intention of the central bank ever getting it back.

The underlying softness of the global economy, however, means that it is quite easy to envisage a downturn in 2017, the 10th anniversary of the start of the financial crisis. In those circumstances, the unconventional would quickly become conventional, as it did after the collapse of Lehman Brothers. The only question would be which central bank would move first. …

The global economy is being strangled by structural problems and greed. QE hasn’t helped, so it seems we’re now seriously considering helicopter money (“QE for the masses”). That might buy us some more time, but it doesn’t address the underlying structural problems. What is needed is major reform – and an end to the illusion of perpetual growth.

21 comments on “Stalled global economy and helicopter money ”

  1. tinfoilhat 1

    “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

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

  3. Steve Alfreds 3

    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.


    • RedLogix 3.1

      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

        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

        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

      . 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

    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

      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

        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

          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

    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

      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

        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

          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

            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

    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

      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

    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

    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

    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.

Recent Comments

Recent Posts

  • Tokelau Language Week reminds us to stay united and strong
    Staying strong in the face of challenges and being true to our heritage and languages are key to preserving our cultural identity and wellbeing, is the focus of the 2020 Tokelau Language Week. Minister for Pacific Peoples, Aupito William Sio, says this year’s theme, ‘Apoapo tau foe, i nā tāfea ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • NZ announces a third P-3 deployment in support of UN sanctions
    The Government has deployed a Royal New Zealand Air Force P-3K2 Orion (P-3) maritime patrol aircraft to support the implementation of United Nations Security Council (UNSC) resolutions imposing sanctions against North Korea, announced Minister of Foreign Affairs Winston Peters and Minister of Defence Ron Mark. “New Zealand has long supported ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • Pacific trade and development agreement a reality
    Pacific regional trade and development agreement PACER Plus will enter into force in 60 days now that the required eight countries have ratified it. Trade and Export Growth Minister David Parker welcomed the announcement that the Cook Islands is the eighth nation to ratify this landmark agreement. “The agreement represents ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Securing a pipeline of teachers
    The Government is changing its approach to teacher recruitment as COVID-19 travel restrictions continue, by boosting a range of initiatives to get more Kiwis into teaching. “When we came into Government, we were faced with a teacher supply crisis,” Education Minister Chris Hipkins said. “Over the past three years, we ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Border exceptions for a small number of international students with visas
    The Government has established a new category that will allow 250 international PhD and postgraduate students to enter New Zealand and continue their studies, in the latest set of border exceptions. “The health, safety and wellbeing of people in New Zealand remains the Government’s top priority. Tight border restrictions remain ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • First COVID-19 vaccine purchase agreement signed
    The Government has signed an agreement to purchase 1.5 million COVID-19 vaccines – enough for 750,000 people – from Pfizer and BioNTech, subject to the vaccine successfully completing all clinical trials and passing regulatory approvals in New Zealand, say Research, Science and Innovation Minister Megan Woods and Health Minister Chris Hipkins. ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • International statement – End-to-end encryption and public safety
    We, the undersigned, support strong encryption, which plays a crucial role in protecting personal data, privacy, intellectual property, trade secrets and cyber security.  It also serves a vital purpose in repressive states to protect journalists, human rights defenders and other vulnerable people, as stated in the 2017 resolution of the ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Ministry of Defence Biodefence Assessment released
    The Ministry of Defence has today released a Defence Assessment examining Defence’s role across the spectrum of biological hazards and threats facing New Zealand. Biodefence: Preparing for a New Era of Biological Hazards and Threats looks at how the NZDF supports other agencies’ biodefence activities, and considers the context of ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • New Approaches to Economic Challenges: Confronting Planetary Emergencies: OECD 9 October 2020
    New Approaches to Economic Challenges: Confronting Planetary Emergencies: OECD 9 October 2020 Hon David Parker’s response following Thomas Piketty and Esther Duflo. Good morning, good afternoon, and good evening, wherever in the world you might be. I first acknowledge the excellent thought provoking speeches of Thomas Piketty and Esther ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Kaipara Moana restoration takes next step
    A Memorandum of Understanding has been signed today at Waihāua Marae between the Crown, local iwi and councils to protect, restore and enhance the mauri of Kaipara Moana in Northland. Environment Minister David Parker signed the document on behalf of the Crown along with representatives from Ngā Maunga Whakahī, Ngāti ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • New Zealand and Uruguay unite on reducing livestock production emissions
    Agriculture Minister Damien O’Connor and Uruguayan Minister of Livestock, Agriculture and Fisheries Carlos María Uriarte have welcomed the launch of a three-year project that will underpin sustainable livestock production in Uruguay, Argentina, and Costa Rica.  The project called ‘Innovation for pasture management’ is led by Uruguay’s National Institute of Agricultural ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • 3100 jobs created through marae upgrades
    Hundreds of marae throughout the country will be upgraded through investments from the Provincial Growth Fund’s refocused post COVID-19 funding to create jobs and put money into the pockets of local tradespeople and businesses, Regional Economic Development Minister Shane Jones and Māori Development Minister Nanaia Mahuta have announced. “A total ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Health volunteers recognised in annual awards
    Health Minister Chris Hipkins has announced 9 teams and 14 individuals are the recipients of this year’s Minister of Health Volunteer Awards.  “The health volunteer awards celebrate and recognise the thousands of dedicated health sector volunteers who give many hours of their time to help other New Zealanders,” Mr Hipkins ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Community COVID-19 Fund supports Pacific recovery
    The Minister for Pacific Peoples, Aupito William Sio says a total of 264 groups and individuals have successfully applied for the Pacific Aotearoa Community COVID-19 Recovery Fund, that will support Pacific communities drive their own COVID-19 recovery strategies, initiatives, and actions. “I am keen to see this Fund support Pacific ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Community benefits from Māori apprenticeships
    Up to 50 Māori apprentices in Wellington will receive paid training to build houses for their local communities, thanks to a $2.75 million investment from the Māori Trades and Training Fund, announced Employment Minister Willie Jackson today. “This funding will enable Ngāti Toa Rangatira Incorporated to provide its Ngā Kaimahi ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Training fund supports Māori jobseekers
    Rapidly growing sectors will benefit from a $990,000 Māori Trades and Training Fund investment which will see Wellington jobseekers supported into work, announced Employment Minister Willie Jackson today. “This funding will enable Sapphire Consultants Ltd. to help up to 45 Māori jobseekers into paid training initiatives over two years through ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Ruakura Inland Port development vital infrastructure for Waikato
    The Government is investing $40 million to develop an inland port at Ruakura which will become a freight super-hub and a future business, research and residential development for the Waikato, Urban Development and Transport Minister Phil Twyford, and Māori Development Minister Nanaia Mahuta announced today. The funding has been has ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • Appointments made to Defence Expert Review Group
    Defence Minister Ron Mark announced today the establishment of an Expert Review Group to review a number of aspects of the New Zealand Defence Force’s (NZDF) structure, information management and record-keeping processes.  The Expert Review Group’s work arises out of the first recommendation from the Report of the Government’s Inquiry ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • No active community cases of COVID-19
    There are no active community cases of COVID-19 remaining in the country after the last people from the recent outbreak have recovered from the virus, Health Minister Chris Hipkins said today. “This is a big milestone. New Zealanders have once again through their collective actions squashed the virus. The systems ...
    BeehiveBy beehive.govt.nz
    3 weeks ago
  • Clean energy upgrade for more public buildings
    More public buildings will be supported by the Government to upgrade to run on clean energy, the Minister for Climate Change James Shaw announced today. Minister Shaw announced that Lincoln and Auckland universities will receive support through the Clean-Powered Public Service Fund to replace fossil fuel boilers. Southern, Taranaki, and ...
    BeehiveBy beehive.govt.nz
    3 weeks ago