Helicopter QE will never be reversed … Readers of the Daily Telegraph were right all along. Quantitative easing will never be reversed. It is not liquidity management as claimed so vehemently at the outset. It really is the same as printing money. It would be better for central banks to put the money into railways, bridges, clean energy, smart grids, or whatever does most to regenerate the economy. – UK Telegraph
Dominant Social Theme: We're all Keynesians now.
Free-Market Analysis: Here's a modest proposal: Let's wipe out the national debt. Much of the West's national debt is owed to various central banks. Columbia Professor Michael Woodford, called "the world's most closely followed monetary theorist," in this article says it ought to be done away with.
Professor Woodford's proposals have all the subtly of a meat cleaver. Not only does he want a debt jubilee, but he also wants an acknowledgement that central banking money printing will go on virtually forever and that governments should use the proceeds to rebuild infrastructure.
This is Keynesianism on steroids, but Woodford is apparently serious and so is the article. Here's more:
It is time to come clean and state openly that bond purchases are forever, and the sooner people understand this the better. "All this talk of exit strategies is deeply negative," he told a London Business School seminar on the merits of Helicopter money, or "overt monetary financing".
He said the Bank of Japan made the mistake of reversing all its money creation from 2001 to 2006 once it thought the economy was safely out of the woods. But Japan crashed back into deeper deflation as soon the Lehman crisis hit. "If we are going to scare the horses, let's scare them properly. Let's go further and eliminate government debt on the bloated balance sheet of central banks," he said. This could done with a flick of the fingers. The debt would vanish.
Lord Turner, head of the now defunct Financial Services Authority, made the point more delicately. "We must tell people that if necessary, QE will turn out to be permanent." The write-off should cover "previous fiscal deficits", the stock of public debt. It should be "post-facto monetary finance".
The policy is elastic, for Lord Turner went on to argue that central banks in the US, Japan and Europe should stand ready to finance current spending as well, if push comes to shove. At least the money would go straight into the veins of the economy, rather than leaking out into asset bubbles.
Today's QE relies on pushing down borrowing costs. It is "creditism". That is a very blunt tool in a deleveraging bust when nobody wants to borrow. Lord Turner says the current policy has become dangerous, yielding ever less returns, with ever worsening side-effects. It would be better for central banks to put the money into railways, bridges, clean energy, smart grids, or whatever does most to regenerate the economy.
The policy can be "wrapped" in such a way as to preserve central bank independence. The Fed or the Bank of England would decide when enough is enough, or what the proper pace should be, just as they calibrate every tool. That at least is the argument. I merely report it.
Lord Turner knows this breaks the ultimate taboo, and that taboos evolve for sound anthropological reasons, but he invokes the doctrine of the lesser evil. "The danger in this environment is that if we deny ourselves this option, people will find other ways of dealing with deflation, and that would be worse."
This lasts paragraph reveals what Lord Turner and the rest of the West's monetary elitists are really worried about: That in the face of the current monetary dysfunction, people shall discover other opportunities. And the article throws in a warning as well, "A breakdown of the global trading system might be one, armed conquest or Fascism may be others – or all together, as in the 1930s."
We've predicted this sort of rhetoric, of course – most recently as regards the election results of Beppe Grillo's party in Italy. It seems to us that Grillo's Greenbacker oriented party is actually affiliated with the globalist George Soros who wants to install a fascist-type government in Italy. You can see an article on this here: Bombshell Confirmation the Paper Money Hoax is Real.
The Telegraph article itself proposes similar measures. The Greenbacker disease is a growing one because the central bank paradigm is diminishing. If those controlling central banks are in danger of losing them, then they will try to install instead the same system within governments themselves.
The putative rationale is that government-controlled central banks will be responsive to the will of the people. This is absolute nonsense, of course. The same power structure that now exists will be in charge – and it has little or nothing to do with formal politics.
Predictably – as it is an expanding and powerful meme – the Telegraph article rehearses it at length, conveying to us the results of the militaristic Japanese regime before World War II, as follows:
Less known is the spectacular success of Takahashi Korekiyo in Japan in the very different circumstances of the early 1930s. He fired a double-barreled blast of monetary and fiscal stimulus together, helped greatly by a 40pc fall in the yen.
The Bank of Japan was ordered to fund the public works programme of the government. Within two years, Japan was booming again, the first major country to break free of the Great Depression. Within three years, surging tax revenues allowed Mr Korekiyo to balance the budget. It was magic.
This is more or less the essence of "Abenomics", the three-pronged attack on deflation by Japan's new premier and Great Power revivalist Shinzo Abe.
Stephen Jen from SLJ Macro Partners says Western analysts have been strangely slow to understand the breathtaking scale of what is under way. The Bank of Japan is already committed to bond purchases of $140bn a month in 2014. This is almost double the US Federal Reserve's net purchases (around $75bn a month), and five times as much as a share of GDP.
We've written about the so-called Japanese miracle here: Poison of Neo-National Socialist Public Banking. What the article doesn't say of course is that Korekyio was murdered by the military industrial complex when he tried to contract the out-of-control monetary bubble he had created. It would have ended badly but for the war itself which introduced a command-and-control economy similar to other fascist states at the time.
In any event, it always the same. We can see the maneuverings. They are clear to us. The central banking paradigm is dying and those at the top want to move it into the grasp of the government itself. This is the reason for the rehabilitation of 1930's monetary cranks Silvio Gesell and Major Douglas (along with the deification of United Nations' functionary Margrit Kennedy). Now come serious proposals to do away with central banking debt and print tidal waves of money to "rebuild infrastructure." Somewhere Ellen Brown is beaming.
Okay, let us be polite and rename this sort of neo-fascism the "Chinese model." China has a government run central bank and what looks to us like an out-of-control monetary economy. Empty skyscrapers and even empty cities riddle the landscape. Price inflation for both food and housing is high in cities.
All this maneuvering is occurring from what we can tell because those who control or at least manage central banking don't want to step out of the way. It would be so simple to declare that money was to be freed from destructive price and volume control and that various kinds of money including gold and silver were going to be allowed to compete.
But, in fact, we don't need any declaration. We believe the current system is going to be subject to a kind of entropy that will delegitimize national debt even without a "jubilee" and inevitably allow market-based solutions to emerge no matter what else is desperately proposed.
That's our scenario. It's at least as feasible as the one that calls for national debt forgiveness and endless money stimulation aimed at vast state-run boondoggles.