Helicopter Money is No Answer
As it becomes more difficult to hide the fact that economies around the world are under-performing at best and failing at worst, the term helicopter money is being thrown around. The concept of helicopter money was popularized by Milton Friedman and then alluded to by Ben Bernanke. For Friedman, it was a means of showing why deflation should never become a problem. Friedman never proposed it as policy. His use was an academic exercise in how deflation could be avoided.
It is not clear whether Bernanke viewed it as Friedman did. But today, central banks around the world are beginning to eye it as a policy not to counter deflation so much as to continue the “extend and pretend” exercise demanded by the political fools responsible for the mess. Quantitative easing is itself a variant of helicopter money. It has succeeded in hiding many of the problems in the economy. It has corrected none of these. Indeed, by preventing market forces from correcting these problems. it has made matters worse.
The Wizards of Oz who call themselves central bankers are no more in control of what is happening than the Wizard behind the curtain in the Land of Oz. Everything they have done is based on deceit. Monetary policy is designed to motivate actions that otherwise would not be taken and are not in the best interest of those deceived. It is designed to make economic actors believe that things are better than they really are by making credit cheaper and deceiving people into making decisions based on false perceptions and bad price signals.
Yes, the stock market is higher, higher than it should be. People confuse stock market valuations with wealth. Wealth derives from increasing real economic output which can only come via capital creation and/or productivity improvements. Neither has occurred but financial asset prices have soared. These valuations are a function of the inflation of financial prices not the creation of real wealth. When these prices collapse, the lesson of real wealth will again be learned with great pain.
There is no economic recovery. Nor will there be one until the sewer we call an economy is cleaned out. That cleansing cannot occur without a major recession/depression. There are two choices facing politicians:
- Face the music now.
- Fire up the helicopters.
Anyone who has any sense of political behavior knows that the music will be avoided as long as possible. As elections approach economic numbers are usually juiced to appear better than they are. This time around is no exception except that the incongruities between what is reported and underlying statistics makes it simple to see how dishonest the system truly is.
Prepare for helicopter money.