It Begins: Australia’s Largest Investment Bank Just Said “Helicopter Money” Is 12-18 Months Away
Just over two years ago, when the world was deciding who would be Bernanke Fed Chair replacement, Larry Summers or Janet Yellen (how ironic that Larry Summers did not get the nod just because a bunch of progressive economists thought he would not be dovish enough) we wrote about a different problem: with the end of QE3 upcoming and with the inevitable failure of the economy to reignite (again), we warned that there remains one option after (when not if) QE fails to stimulate growth: helicopter money.
While QE may be ending, it certainly does not mean that the Fed is halting its effort to “boost” the economy. In fact… the end of QE may well be simply a redirection, whereby the broken monetary pathway, one which uses banks as intermediaries to stimulate inflation (supposedly a failure according to the economist mainstream), i.e., “second-round effects”, is bypassed entirely and replaced with Plan Z, aka “Helicopter Money” mentioned previously as an all too real monetary policy option by none other than Milton Friedman and one Ben Bernanke. This is also known as the nuclear option.
Today, one day after the Fed according to some finally lost its credibility, none other than Australia’s largest investment bank, Macquarie, just made the case that helicopter money is not only coming, but has a “very high” probability of commencing its monetary paradrops over the next 12-18 months.
Time for a policy U-turn? Back to the future: British LeylandFrom conventional QEs to more unorthodox policies…
As discussed (here and here), we do not believe that investors are likely to benefit from acceleration in growth rates, trade or liquidity and indeed on the contrary, negative feedback loops from EMs to DMs imply that neither would be able to support global growth. Secular stagnation is the key explanatory variable (here).
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