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Our Approaching Winter of Discontent
Our Approaching Winter of Discontent
The tragedy is so few act when the collapse is predictably inevitable, but not yet manifesting in daily life.
That chill you feel in the financial weather presages an unprecedented–and for most people, unexpectedly severe–winter of discontent. Rather than sugarcoat what’s coming, let’s speak plainly for a change: none of the promises that have been made to you will be kept.
This includes explicit promises to provide income security and healthcare entitlements, etc., and implicit promises that don’t need to be stated: a currency that holds its value, high-functioning public infrastructure, etc.
Nearly “free” (to you) healthcare: no.
Generous public pensions: no.
Social Security with an equivalent purchasing power to the checks issued today: no.
As for the implicit promises:
A national currency that holds its value into the future: no.
High-functioning public infrastructure: maybe in a few places, but not something to be taken for granted everywhere.
A working democracy in which common citizens can affect change even if the power structure defends a dysfunctional and corrupt status quo: no.
A higher education system that prepares its graduates for secure jobs in the real-world economy: on average, no.
Cheap, abundant fossil fuels and electricity: during recessionary head-fakes, yes; but as a permanent entitlement: no.
High returns on conventional capital (the kind created and distributed by central banks): no.
A government that can borrow endless trillions of dollars with no impact on interest rates or the real economy: no.
Pay raises that keep up with real-world inflation: no.
Ever-rising corporate profits: no.
You get the idea: the status quo will be unable to keep the myriad promises made to the public, implicitly and explicitly. The reason is not difficult to understand:
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Time for Helicopter Money?
Time for Helicopter Money?
WASHINGTON, DC – “Out of ammo?” The Economist recently asked of monetary policymakers. Stephen Roach has called the move by major central banks – including the Bank of Japan, the European Central Bank, and the Bank of Sweden – to negative real (and, in some cases, even nominal) interest rates a “futile” effort that merely sets “the stage for the next crisis.” And, at the February G-20 finance ministers meeting, Bank of England Governor Mark Carney reportedly called these policies “ultimately a zero-sum game.” Have the major advanced economies’ central banks – which have borne the burden of sustaining anemic post-2008 recoveries – really run out of options?
It certainly seems so. Central-bank balance sheets have swelled, and policy rates have reached their “near zero” lower bounds. There is plenty of cheap water, it seems, but the horse refuses to drink. With no signs of inflation, and growth still tepid and fragile, many anticipate chronic slow growth, with some even fearing another global recession.
But policymakers have one more option: a shift to “purer” fiscal policy, in which they directly finance government spending by printing money – a so-called “helicopter drop.” The new money would bypass the financial and corporate sectors and go straight to the thirstiest horses: middle- and lower-income consumers. The money could go to them directly, and through investment in job-creating, productivity-increasing infrastructure. By placing purchasing power in the hands of those who need it most, direct monetary financing of public spending would also help to improve inclusiveness in economies where inequality is rising fast.
Helicopter drops are currently proposed by both leftist and centrist economists. In a sense, even some “conservatives” – who support more public infrastructure spending, but also want tax cuts and oppose more borrowing – de facto support helicopter drops.
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