STAFF NEWS & ANALYSIS
Beware of the Chaos of Helicopter Money
By Daily Bell Staff - May 11, 2016

Indian central bank governor says helicopter money no panacea … Indian Central Bank Governor Raghuram Rajan said on Tuesday that he had doubts “helicopter money”, or free cash given directly to citizens to stimulate growth, would be successful if adopted by developed world policymakers. -Reuters

Raghuram Rajan has come out against helicopter money and this is probably to be expected from India’s version of US central banker Paul Volcker.

Both men hiked interest rates hard to halt rapid price inflation. In Rajan’s case, the rupee was depreciating at 10 percent per year.

Now the rupee has stabilized and Rajan gets credit for monetary success and for working closely with India’s Ministry of Finance.

Rajan is surely correct about central bank helicopter money but as the head of India’s central bank, he is constrained from  taking the next step in the dialogue.

That would be to explain that central banks themselves are useless.

Ultimately, the ways that central banks can manage monetary economies are extremely simplistic.

Bankers either add or subtract currency from the money stock.

Lately, central bankers have started to push interest rates into negative territory but the results have not been encouraging.

Thus speculation about helicopter money – currency that is distributed directly to consumers and that circumvents bank lending.

We’ve covered the “basic income” movement in the past. The basic income can be distributed directly from governments to individuals. It’s a great form of propaganda for populism aims.

The real reason for offering a “basic income” is monetary.

It is another way that central bankers hope to expand moribund economies.

But that, too, is propaganda.

Central bankers are well aware that a basic income will cause chaos wherever it is implemented.

From the article:

Governor Rajan also said helicopter cash could have the opposite of the desired effect of encouraging recipients to spend. The more aggressive a measure was, the less understood its consequences, he added.

“Somebody getting this money and seeing the central bank governor throwing this money out of the helicopter, saying ‘is this guy crazy? Has the world gone nuts? I am going to save this, because I am not sure what is going to happen’.”

At least he’s correct about helicopter money.

The reason it hasn’t been tried before is because it exposes, to a greater or lesser degree, the reality of central banking.

Central banks create money from nothing.

But when people offer or accept currency, they are doing it within a transactional framework. And banks, when they issue currency into the economy are usually doing so within the context of a loan.

Most people don’t have any idea that money is fundamentally free and is provided freely to a small group of people but not to others.

Helicopter money begins to change that perception.

People beginning to receive such money would indeed think, as Rajan says, “has the world gone nuts.”

This is the main reason that monetary give-aways haven’t been tried on a massive scale.

They might capsize the whole system by making people  aware of how it actually operates.

Of course, now central bankers – or those responsible for the system – may want to make more people aware.

That is one way to create a crisis in the system.

And it can be argued – as we have – that the international banking groups with the most monetary control want to generate a powerful systemic crisis.

Only via “chaos” can there be significant change.

And the change sought after is a more globalist monetary system with an international currency.

These, then, are the available options:

Either helicopter money is distributed for purposes of creating additional liquidity, in which case it won’t work. Or it is offered to create agitation, to make people believe the current system is “crazy” – which, actually, it is.

If central bankers are intent on creating massive and mounting monetary frustration, they will offer helicopter money and speed the final dissolution of current, regional central banking system.

Conclusion: If you see a consensus building around the “basic income” and “helicopter money” please beware. The end of the current system is advancing with all the chaos that foretells.

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  • Bruce C.

    I’m not so sure that enough people would think “helicopter money” is so crazy, so their plan may back fire. People might instead say, “It’s about time,” or “I told you the government just gives away money,” and maybe it could all be promoted by a Nobel Prize winner for discovering the cure for poverty and the drudgery of working for lucre.

    For examples, hardly anyone in the main stream (whatever) seems to balk about raising the minimum wage either to the $15 level or in general. Similarly, I haven’t heard any criticism of the basic income concept either. Just yesterday, in fact, I read a piece written by the Daily Bell staff lamenting that government revenues should be “printed” by their central banks instead of taxing its citizens, and there was nary a peep about it from all their sharp readers! All of those are forms of “helicopter money.”

    • One is an internal transaction (swapping fiat for taxes) and the other is an overt and obvious printing arrangement (basic income), even if the government distributes it.

      You seem convinced that people already know that money is printed from nothing. How so? And if it is such an insignificant change, why didn’t it happen long ago? Why is it only being discussed now, and with trepidation …

      • Bruce C.

        First of all, swapping fiat for taxes is the same as a basic income funded by the CB. The “problem” is that currency created without accompanying debt (which automatically creates a demand for it and thus gives it transactional value) it becomes fraudulent in that it misrepresents itself. Transactional value comes from the recipient of the currency believing that the supplier exchanged some sort of value to obtain it.

        The problem “they” have is that by giving out money so directly and blatantly even the most simple minded would inevitably ask where it comes from. Usually people think government largesse comes from taxes or borrowing/bond-sales but I don’t think that’s so believable any more. “Everybody” knows that the government is strapped and borrowing increases the national debt that “everybody” says is a bad thing. Also, Wall Street and financial types would balk and if word gets out others might start to wonder too.

        The reason it didn’t happen long ago is the “need” wasn’t as great and everybody who knows how it would work “knows” that it wouldn’t work – at least for very long. However, I think what surprises everyone is how long things are taking to play out. Japan is still standing, China is just starting to wobble, “money printing” hasn’t created price inflation (yet), so maybe all the assumptions and models are being questioned. Maybe ‘helicopter’ could “work” for a few decades. Who knows?

        • 1. A basic income is not the same as an internal government transaction wiping out taxes.

          2. Why didn’t it happen before? One reason is because rates weren’t stuck at zero.

          • Bruce C.

            Monetarily it is because unbacked (by bonds) currency is created in both cases.

            If it replaces tax revenue then the money still goes out into the economy in the form of
            “government expenditures” (military, entitlements, etc.).

            In the case of a basic income unbacked currency is created and given directly to consumers to spend so that money enters the economy that way.

  • Chuck

    Agreed. They try to bamboozle us with the debt smokescreen. No one owes a single penny to the Federal Reserve (or any other central bank) because they didn’t lend anything. You can’t lend what you don’t have and the central banks don’t have anything.

    • Good point. Is all manipulation of a sort …

    • Bruce C.

      Same is true of regular banks, although as they spend what they create and lend they claim a legitimate liability.

  • Quite another school of expanding thought, DB, would profer that increased mass exposure to the corrupted and perverted money system knowledge base and as so succinctly stated here on the Daily Bell ….

    The reason it hasn’t been tried before is because it exposes, to a greater or lesser degree, the reality of central banking.

    Central banks create money from nothing.

    But when people offer or accept currency, they are doing it within a transactional framework. And banks, when they issue currency into the economy are usually doing so within the context of a loan.

    Most people don’t have any idea that money is fundamentally free and is provided freely to a small group of people but not to others.

    …… makes the basic income helicopter money dropping to assembled masses, rather than to carefully selected exclusive elites, inevitable and wise, should such elites and that and those responsible for and/or in charge of leading with failed free [Central banks create money from nothing] banking, wish to retain their heads to spend their amassed fortunes …… for the natives are more than just restless and dangerous and a lot smarter than ever before was realised possible. And whenever they can be understandably psychopathic because of the crass treatment deliberately meted out to them, is sweet justice unlawful in deadly violent action/reaction/proaction?

    Who would like to police and defend those found guilty as charged perpetrators against the wishes of the masses at the behest of corrupted and perverse executive elites, and in so doing target themselves for sociopathic mob attention?

    If there be any form of cancer in a system, let alone a virulent malignant strain, one destroys it and cuts it out of the body wholesale. Survival depends upon it.

  • Within the U.S. there is a debt free money already available that circumvents bank lending, it’s called “legal tender”. Legal tender is not borrowed, loaned or spent into circulation and the only legal way it gets into circulation, is by your demonstrated productivity and public demand. for the medium.

    Another interesting thing, neither the Fed or the banks possess the legal authority to create money, and they don’t. What they do create is asset backed, debt based credit, which his not designated or acknowledged in law as being a money, or a currency, or a medium of exchange, with the only legal aspect associated with it, residing in the debts incurred with its use.

    You see, ours is a Legal Tender Monetary System. This means that our money is not defined by Murray Rothbard, Joseph Salerno, Austrian Economics, Keynesian Economics, Monetarist Economics, the Federal Reserve, the U.S. Banking system, or what people may use, it is defined by law, and nowhere in law does it designate or even acknowledge Fed and bank generated asset backed, debt based credit as being a legal tender, or money, or currency, or a medium of exchange, it is 100% debt.

    The legal tender in use today is provided as a duty an obligation of the U.S.G., born from the outlawing and confiscation of gold as money back in 1933. People with and without bank accounts, turned in their gold property and received the legal tender as replacement property. The legal tender system today is an extension of that time. That time has obscured the legal tender’s gold origins, existing as the people’s property first, makes it no less our property in the present, and the banking system’s legal obligation to provide either upon demand or over time, the fruits of our labor as represented by those deposit accounts, our legal tender property. It was our money first.

    People are confusing a means of payment, the transfer of a debt obligation (credit), for the medium of exchange, what is owed as payment (an asset). By legal definition United States coins and currency, including Federal reserve notes, are legal tender money, a medium of exchange by law. Checks as well as debit cards, credit cards, money orders, etc., are a means of payment, referred to as a generally accepted (institutional) arrangement or method that facilitates delivery of money from one to another. Payment has not been made unless or until actual money proper has changed hands. All credit is debt outstanding.

    All you’re doing when you use a debit card (credit) to make a purchase is, transferring your obligation to pay the vendor, to the bank, payment has yet to be made. The bank deducts the amount from its debt to you, as represented by your account with them, and adds that amount to the debt it owes to the vendor, as represented by his account with the bank. There was no money or currency of any type, digital, electronic or otherwise, used or exchanged in that transaction, just a transfer of an obligation to pay, which has yet to be met.

    The notion that we’re using ‘digital money’ or ‘digital currency’ or ‘digital dollars’ as a medium of exchange is nothing more than a trick of the mind, a figment of our overactive imaginations, a deception, it’s how we rationalize the transaction, and it’s how the banksters get away with stealing our labor and wealth.

    http://carl-random-thoughts.blogspot.com/

    • That identifies a system into racketeering, Dwain Dibley. Not a smart move in intelligent circles and really stupid in machine driven market places and dumb robospaces/HFT floors. And it is catastrophically self-defeating as it matures in time and rots with age.

      You might like to consider the present as clear and transparent evidence of the latter being currently obscured and denied its credibility mainstream with an exploding liability to massive unredeemable debt and crazy deficit. But that cannot fool most all of the people all of the time and that is a fabulous weakness easily exploited to smash and flash crash such rigged and crooked systems.

    • Pilgrim

      That being the case, is there 19 trillion dollars worth of gold in Fort Knox? That’s the national debt.

      I’d like to know how much “legal tender” was issued in exchange for the confiscated gold vs how much “legal tender” exists today. If there’s more “legal tender” now than there was issued to pay for the gold then, the people have been cheated by an ongoing scam.

      If the US doesn’t have enough gold on hand to buy back every single “legal tender” certificate in existence, they have perpetrated a con and should be given a fair trial and hanged.

      Don’t tell me they don’t create our current medium of exchange out of thin air. We know better.

      • Why do you believe the U.S.G. needs to buy back the $1.45 trillion in legal tender with gold? Gold is irrelevant to the current issue. And no, they did not create the current legal tender out of thin air, they created it with offset printing press.

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