This sort of thing (from The Economist) makes me want to tear my hair out:
Despite central banks’ efforts, recoveries are still weak and inflation is low. Faith in monetary policy is wavering.
Seriously? After the Fed raised rates in December, despite “low” inflation and a “weak” recovery, people are still claiming that the poor central banks tried hard to inflate, but that it was just too difficult? This sort of thing is beyond clueless, it almost leaves me speechless. What world is the Economist living in? How hard is it to understand that the Fed raised rates to prevent inflation from rising? This is not rocket science.
And “effort”?!?!? How much effort does it take to print currency and buy assets? We aren’t talking about storming the beaches of Normandy, or sending a man to the moon, or building the transcontinental railroad. I know that modern governments have almost completely lost the ability to produce substantive physical infrastructure (except for China.) But are we to believe that even printing money now requires too much “effort”, and that we need to give those poor souls a break from their arduous duties? My God! No wonder Trump is doing well, the entire technocratic class in the West is a bunch of worthless lazy bums. Can’t they do anything? Even debasing a currency is beyond their ability?
I’m reminded of an old Monty Python routine:
But it gets worse. The line I quoted might just be a slip of the tongue. But consider this:
The time has come for politicians to join the fight alongside central bankers. The most radical policy ideas fuse fiscal and monetary policy. One such option is to finance public spending (or tax cuts) directly by printing money—known as a “helicopter drop”. Unlike QE, a helicopter drop bypasses banks and financial markets, and puts freshly printed cash straight into people’s pockets. The sheer recklessness of this would, in theory, encourage people to spend the windfall, not save it.
So let’s see. We print up a zillion dollars, or euros, or whatever. What are we going to do with all this money? Well, we could buy assets. Perhaps create a sovereign wealth fund, like those lucky countries have, you know, Singapore, Norway, UAE, etc. Or, we could just give it all away, and continue down the road toward being a bankrupt, debt-ridden economy like Greece. Hmm, decisions, decisions . . . don’t rush me . . .
I know, let’s do a helicopter drop, because the sheer recklessness of it sounds neat. Isn’t that what we were taught in grad school back in the 1970s, just print lots of money and give it away? Sovereign wealth funds are so boring, and we’d have to keep track of the financial markets. Giving away money is so much more fun.
PS. I hope it’s clear I’m not advocating printing up money to create a sovereign wealth fund, I’m just trying to figure out why even that moronic idea (and it is certainly stupid) would not be superior to a helicopter drop.
Update: As usual, Tyler is much more polite than me:
So if in a monetary policy or macroeconomic analysis you read the phrase “out of options,” you would do well to substitute in “governments do not wish to pursue their remaining options.”