Titian’s helicopter drop

Now that I’m retired, I’m playing around a bit with the layout of my blog. For the past 13 years, I’ve been annoyed that the narrow central column of text made it hard to read graphs, and made pictures smaller than I would like. But I didn’t know how to fix the issue and was too busy to research the subject.

A few weeks ago, I had a tech guy widen the central column and add an attractive old dollar bill on top. More recently, I experimented with a new banner on top using a screenshot from a famous old painting by Titian, which shows a “helicopter drop” of gold coins onto the Greek princess Danaë. I’ll say a bit more about the painting below, but first a few comments on helicopter drops, which are widely misunderstood.

In order to be a helicopter drop in the traditional sense of the term, the new money being injected must be zero interest base money, and it must be given away rather than sold. Thus the creation of interest bearing reserves doesn’t count, as most “QE” programs merely exchange one interest bearing government liability for another. A true helicopter drop involves showering the public with new zero interest currency notes.

A combined fiscal–monetary expansion can have the effect of a helicopter drop even if the new cash is not given away. Thus, assume the government sends a $1000 check to each citizen, financed with interest-bearing debt. At the same time, all of that new debt is purchased with new currency. Although the new cash is not literally given away in this case, the combined effect of this fiscal/monetary action is the same as simply giving each citizen $1000 in cash.

Again, this doesn’t apply to real world QE programs combined with fiscal stimulus, such as the various Covid relief bills. Those mostly involved new debt being purchased with interest bearing reserves. However, a small portion of the QE did constitute a helicopter drop, as currency held by the public also increased somewhat during Covid.

In most cases, currency injections merely accommodate changes in the public’s real demand for cash. When this occurs, inflation stays near the 2% target. But during 2021-2022, prices rose about 8% above target, and the extra currency demand associated with that higher price level is a true “monetization of the debt”, in the classic sense of the term. In this case, we are talking about roughly $200 billion in “helicopter drop” money over the past few years.

Economists often assume that helicopter drops are a foolproof method of stimulus. But if the public is rational then the expansionary effects are no greater than for an ordinary open market purchase of bonds, without any accompanying fiscal stimulus. When the Fed buys bonds with a permanent increase in the currency stock (an open market operation), the public’s future expected tax liabilities fall by an equal amount. In a world of 3% interest rates, a gift of $1,000 is worth exactly as much as a permanent reduction of taxes by $30/year.

PS. Titian is perhaps my fourth favorite painter, and probably my favorite among what I’d call the non-miraculous artists. Here is the Prado version of Danaë, from which the new header is taken:

This link shows a better image.

While the one in the Prado is probably the best version, there are at least 6 others, with the prettiest being the one in the Wellington Collection:

This link shows the Wellington version before its recent restoration. The difference is stunning. (Unfortunately, the top portion is lost.)

PPS. There’s a certain type of person that I find very annoying. They’ll make claims about whether or not economics is a science, as if the statement told us something useful about the world. These intellectual mediocrities are the sorts of people that engage in tiresome debates about whether something is “art or pornography”. For them, words have a sort of mystical power.

Titian’s paintings of Danaë are clearly pornographic, and were intended to be pornographic when he painted them. (Discerning viewers will notice that the Prado version is more pornographic than the Wellington version.) So the only sensible way of responding to the “art or pornography” question is, “Why not both”? Because these works of pornography were intended for the elites, a more polite term is generally employed, say “erotica”.

To conservatives, the term “stimulus” has a negative connotation, suggesting a search for immediate gratification without any thought of future consequences. Both monetary stimulus and sexual promiscuity are “irresponsible”.

PPPS. Justin E.H. Smith had this to say about artists that were bad people:

Lest you conclude in light of what I have said so far that I must be a “bad” person, a “garbage human being” as they love to say on Twitter, perhaps this is the moment to assure you that, if I could, I would not hesitate to call Child Protection Services on these monsters I have admitted to valuing as artists. . . .

But it is annoying to have to provide these assurances, as to do so implies acceptance of the general frame in which art, and its relationship to morality, are understood in our society. This frame, whether its upholders know it or not, shares with socialist realism, and with earlier nineteenth-century nationalist attitudes towards arts and literature, the presumption that to value a work of art must at the same time be to wish to give the person who made it a medal, when he still lives, or to build him a statue when he dies, or to name a prize after him or even a university.

And concludes:

So he’s problematic? Jerry Lee [Lewis] could have told you that himself. In fact he has been doing so, in his art, on stage, in the public eye, before the world, presumably before his God, for the past seventy years.

PPPPS. For me, the miraculous painters are Velázquez, Vermeer, and Cézanne. The ones where you can’t figure out how they did it.


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20 Responses to “Titian’s helicopter drop”

  1. Gravatar of joe camel joe camel
    30. December 2022 at 13:20

    good god man, vermeer? he used a perspective box. the only genius was davinci

  2. Gravatar of Travis Allison Travis Allison
    30. December 2022 at 14:31

    Scott: You said, “A combined fiscal–monetary expansion can have the effect of a helicopter drop even if the new cash is not given away. Thus, assume the government sends a $1000 check to each citizen, financed with interest-bearing debt. At the same time, all of that new debt is purchased with new currency. Although the new cash is not literally given away in this case, the combined effect of this fiscal/monetary action is the same as simply giving each citizen $1000 in cash.”

    Suppose the “government” consists of the Treasury and the Central Bank. Are you assuming that the Central Bank keeps rolling over the new debt it acquired with the new currency when the new debt matures?

  3. Gravatar of ssumner ssumner
    30. December 2022 at 15:22

    Joe, “he used a perspective box”

    Even if true (and we don’t know that), it would tell us precisely nothing about Vermeer’s art. Yours is the sort of comment I’d expect from someone from the world of science or business.

    Travis, You asked:

    “Are you assuming that the Central Bank keeps rolling over the new debt it acquired with the new currency when the new debt matures?”

    Yes.

  4. Gravatar of rayward rayward
    31. December 2022 at 06:45

    Sumner has presented a riddle for his readers. Zeus’s money drop was made with the expectation of something in return, an economic transaction in which both parties received consideration. Today’s money drop also comes with the expectation of something in return, an economic transaction in which both parties receive consideration. Is this a public choice riddle? Or something more basic, in which the recipient of the money drop is the one being screwed? BTW, in the ancient world mythology, the intersection (intercourse) of Gods and mortals was commonplace. As was virgin birth.

  5. Gravatar of foosion foosion
    31. December 2022 at 06:52

    Scott, any plans to go to the Vermeer exhibition at the Rijksmuseum?

    The idea that using technology to produce wonderful art makes the art less wonderful is a bit bizarre. Also, how many others were using it?

    “But if the public is rational”. Clearly it’s not. It’s not clear that assuming rationality is a useful assumption in this context.

  6. Gravatar of bb bb
    31. December 2022 at 07:10

    Scott,
    Great post. Titian was the one who got me into it. Love Cezanne and we have nice ones here in DC. Also love Prada
    Pornography is such a useless concept. Labeling something as pornography literally means “this offends me”. So?
    Curious, are you a fan of the term “stimulus”?

  7. Gravatar of Spencer Spencer
    31. December 2022 at 08:22

    “The Last Supper” is more appropriate. As Leonardo said: “Likewise in painting, I can do everything possible”.

  8. Gravatar of Spencer Spencer
    31. December 2022 at 08:39

    re: “However, a small portion of the QE did constitute a helicopter drop, as currency held by the public also increased somewhat during Covid.”

    That’s why Shadow Stats uses: “Basic M-1 is defined as Currency plus Demand Deposits (checking accounts)”
    http://www.shadowstats.com/alternate_data/money-supply-charts

    The difference in the “means-of-payment” money is striking.

  9. Gravatar of Travis Allison Travis Allison
    31. December 2022 at 10:15

    Scott, in a comment above about Vermeer, you said, “Even if true (and we don’t know that), it would tell us precisely nothing about Vermeer’s art.” Could you expand on that? In your post, you said, “For me, the miraculous painters are Velázquez, Vermeer, and Cézanne. The ones where you can’t figure out how they did it.” joe camel’s point was that we perhaps know how Vermeer “did it”. Perhaps you could expand on what you mean by “did it”, since it appears you mean something different than “technically executed the painting.”

  10. Gravatar of ssumner ssumner
    31. December 2022 at 10:51

    foosion, I’d like to go, but unfortunately that’s too far from California. I’ve seen all but one of Vermeer’s paintings in person, at various museums.

    bb, I did a post:

    https://www.econlib.org/a-rose-by-any-other-name-2/

    Travis, It would be like saying that Vermeer’s magic can be explained by the fact that he used a paint brush, or a magnifying glass. A perspective box is merely a tool to help with perspective. Anyone can use one. But perspective is the last thing anyone would point to as being exceptional in Vermeer’s art. It’s the way he paints light that makes him special.

  11. Gravatar of Dr Richard Dr Richard
    31. December 2022 at 13:27

    Scott,

    Am I reading this article correctly? Unemployment went up and as a result the market responded by gaining value? The article makes it seem like the investors were happy that unemployment exceeded expectations. The stock market seems to be anti-correlated with any gains for working class people. If unemployment is down, which is a good thing, then the stock market goes down. Very odd.

    “The Dow Jones Industrial Average rallied 300 points Thursday after initial unemployment claims data from the Labor Department exceeded estimates.

    Weekly unemployment figures showed first-time claims rose to 225,000 vs. 216,000 in the previous week, higher than Econoday estimates for a rise to 222,000. Claims have been up and down in recent weeks, but generally trending lower since a mid-November high of 241,000.”

    https://www.investors.com/market-trend/stock-market-today/dow-jones-futures-rise-ahead-of-jobless-claims-tesla-stock-races-higher-on-reiterated-buy-rating/

  12. Gravatar of Philo Philo
    31. December 2022 at 23:49

    @ bb:

    You write: “Labeling something as pornography literally means ‘this offends me’.” Scott disagrees: he labels the Titian painting as pornography, but obviously is not offended by it. Puritanism is not universal.

  13. Gravatar of David S David S
    1. January 2023 at 14:20

    I expect this blog to continue its downward spiral in 2023—soon, Scott will be subjecting us to Goya, van Gogh, and eventually, Rothko.

    I’m going to end up being upset because my bet on Hypermind for 2022 NGDP will turn out to be too high. Won’t know for sure for a few months when the final PCE data is collected. I probably shouldn’t quit my day job.

  14. Gravatar of ssumner ssumner
    1. January 2023 at 17:53

    Dr. Richard, I’m not sure. Sometimes a weak jobs report leads to lower interest rates, which can help stocks. I don’t believe that stock investors like unemployment, other things equal. It may be correlated with something else they like, at certain times. (There are also times when bad jobs reports depress stock prices.)

    Philo, I do understand that many view the term is a pejorative, sort of like “terrorism”. I view it as merely descriptive.

    David:

    “Scott will be subjecting us to Goya, van Gogh, and eventually, Rothko.”

    No, but I will subject you to some other painters.

  15. Gravatar of joe camel joe camel
    3. January 2023 at 15:48

    sumner likes vermeer, but doesn’t understand his fame: it is founded largely on the “photographic” realism. however, it has been lately revealed that realism is the result of a perspective box. the bloom blows off the rose yet tenaciously in the mind of the refuted disciple.

  16. Gravatar of Sara Sara
    4. January 2023 at 01:14

    You can only roll over the new debt if you can issue new debt. It’s such brain dead post.

    1. People have already lost confidence; they know the debt cannot be repaid. Not to mention, Sumner monetary thugs have stepped over the line so many times that they’ve lost all credibility. Nobody knows if their accounts might be frozen tomorrow because they have different political views, or because they protested outside parliament or the whitehouse, or because they don’t agree to certain GLOBAL rules, handed down by woke western white dummies; just take a look at the trillions they robbed through the frozen accounts of Russia, Iran, Venzuela, etc, etc. Who is the next bogeyman? The pathetically armed North Korea? Really? Candian truckers playing icehockey near parliament? I’m so scared. Or is the next great threat you and me?

    2. Inflation (theft) might work, for a while, to pay off the debt burden until people run for the hills.

    3. Sumenr and the band of monetary cronies will probably try and freeze your assets when you try to run.

    4. For those who want to get out before Sumner and his thugs steal it, I suggest BTC or Gold. And not paper gold, because Sumner’s thugs are setting a nice trap for those investors. You’ll have to get your hands on real gold, which, bizarrely, trades for almost 1.5 times the current market price: giving one the impression that the centralized actors issuing IOU’s are manipulating the paper price for the purpose of discouraging you from taking back control over your money.

    Always remember that a monopoly over the supply of money leads to tyranny. Sumner’s profession is a psuedoscience that only attracts those who seek power. And those that seek power are the people least deserving.

  17. Gravatar of Tacticus Tacticus
    4. January 2023 at 03:02

    I have not been so lucky to see so many Vermeer’s in person, so I am eagerly awaiting the Rijksmuseum exhibition. Tickets booked for May – can’t wait!

    Lol @ the discussion of whether he used a camera obscura. Philistines.

    bb: I can think of plenty of pornography that does not offend me, personally 😉

    Sara: I can buy physical gold bars for about 2.5% over the spot price right now. Get out of here with your 1.5x-price conspiracy theory nonsense.

  18. Gravatar of ssumner ssumner
    4. January 2023 at 08:51

    Joe, LOL, and Beethoven’s symphonies can be attributed to his use of the metronome.

    Tacticus, The funniest part is that they don’t even understand what makes Vermeer’s art so impressive. Even the term “Philistine” is too kind.

  19. Gravatar of anon/portly anon/portly
    7. January 2023 at 00:01

    TC has a post today which says “it seems he may have used a camera obscura.”

    I don’t quite remember why (other than being amazed by the paintings), but about 25 years ago (I think, it’s copyright 1994) I bought one of those “Taschen” books on Vermeer, with I think all or most of his works. It says “[w]e now know” that he used a camera obscura “for most of his paintings.”

    But then it says:

    “What is more, far from hiding the effects of the instrument, such as unfocussed outlines and the famous pointillist dots of light, he drew attention to them.”

    Then it goes on to say “[w]e might even say the camera obscura became a source of his style” and that “[t]his hidden tendency to abstraction in Vermeer’s technique was the cornerstone of his growing fame in the last third of the nineteenth century.”

    I don’t know if the author (Norbert Schneider) is near the mark or not – I know FA about art. I think the Vermeer book is the only art book I’ve ever bought, though maybe I’m forgetting something.

    But I don’t understand why using a device like this would be considered a “cheat” of some sort. I hadn’t realized there were “Marquess of Queensberry” type rules for the making of paintings. I would have thought it was anything goes.

    Someone like joe camel must really love the use of Autotune and note-by-note pitch correction in music nowadays.

  20. Gravatar of ssumner ssumner
    7. January 2023 at 09:04

    anon/portly. I recall reading years ago than many artists used to use the camera obscura, but there is only one Vermeer. Keep in mind that three of his very best paintings were presumably not made with this device (Girl with the Pearl Earring, View of Delft, The Little House.) It doesn’t at all explain what is so special about his painting–at least in any direct sense.

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