‘Helicopter Money’: This Is the Game-Changer Geo-Politically
As the US and the UK, to stem Covid-19 infections, adopt a close-to-wartime approach, with intrusive levels of intervention into social life, these governments – as the corollary to lockdown – are proposing massive bail-outs. At first brush, this may seem both sensible and appropriate. But wait. Bailing out what? Well, financial markets of course, but then … just about everything: Boeing, the US Shale-oil industry, airlines, the tourist industry, and (in the US) every citizen – through posting them a $1,000, or a $2,000 cheque, this week – or, as is mooted in DC – perhaps one every month. Great! Just like Christmas.
The markets crashed: $½ Trillion in ‘liquidity’ here; $1.5 Tn there – and there – and there. An alphabet soup of lending facilities — pretty soon you are talking ‘real money’. The alphabet soup cloaks the collective size of liquidity available to banks. And likewise for individuals? 210 million US adults X $1,000, X 12 or 18 (months), is a staggering sum of money — closer to $4 Tn, or 18% of US GDP. Likewise, UK Chancellor Rishi Sunak pledged £330bn, or 15% of GDP, to support the economy, on top of a three-month mortgage payment holiday and a slew of tax deferments, and to do, as well, “whatever it takes”.
So, how come? How is this money suddenly available – when we have repeatedly been told in the wake of the 2008 crisis that austerity must be the only answer? Well, welcome to the ‘new orthodoxy’ (actually it is not new at all: France tried it in the eighteenth century when it ‘printed’ the Assignats). Call it ‘helicopter money’, or, the so-called ‘Modern Monetary Theory’: The principle is that it is okay to print money – if governments don’t otherwise have it. The point here is that ‘helicopter money’ (money conjured out of nothing: empty units reflecting no underlying real economic value) is a paradigm change. A major paradigm change.
It is the legacy from 2008. That was primarily a banking crisis: Printing money seemed to work out pretty well then, in the view of the élites. The main reason that those ‘experts’ have thought that printing money worked in the wake of 2008 was because the Central Banks were able to reflate the financialised asset bubbles.
“But that wasn’t success, that was failure”, financial guru, Peter Schiff comments. It was a failure because it resulted in even bigger bubbles, and even greater debt – which precisely has set us all up for today’s crisis: For we are going into this crisis naked of any real tools to deal with supply-shock.
In 2008, everybody believed the money ‘printing’ was temporary: Bank balance sheets were all gummed up; and the Fed was going to be able afterwards to normalize interest rates, and shrink its balance sheet. Well, nobody is going to believe that, this time. No, debts will soar – and will be ‘forever’ debts.
Yet for today’s policy-makers, it all seems so reasonable, so plausible: If the Fed floods the financial system with money, interest rates can stay at zero for ever. What’s not to like about this? Certainly, it fits with Trump’s real estate career, built on low interest, easy debt. Governments now may borrow for a hundred years at zero interest; and banks can lend like fury, as the Fed has dropped the requirement for banks to keep any reserves against their loans (i.e. to ‘print’ more easy credit for the favoured).
Better still, governments can just conjure the money out of thin air (by monetising its debts): It can use these funds to bail out all those businesses and citizens adversely affected by Covid-19, and become heroes. Welcome to the new ‘Orthodoxy’.
https://www.strategic-culture.org/news/2020/03/23/helicopter-money-this-is-the-game-changer-geo-politically/