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“Helicopter Ben” Bernanke is embracing his nickname…
The former Federal Reserve chair just advocated “helicopter money” on his blog. It’s a radical stimulus approach. Central banks print billions of new dollars then “drop” them on an economy.
Right now the Fed’s new money must go through the banking system. But if bank lending is weak, these funds won’t filter into the wider economy.
Central banks worldwide have been coaxing banks to lend more. Their latest tactic uses negative interest rates. They hope this will prod depositors to borrow, spend, and invest—stimulating the economy—rather than pay to keep money in the bank.
It hasn’t worked. Citizens in countries with negative rates—like Japan—have started “hoarding” cash outside the bank.
Bernanke’s helicopter drop bypasses the banks. The Fed cuts a check direct to the U.S. Treasury. Then the Treasury pays for new public works projects… or issues fresh tax rebates direct to the people.
New debt won’t be created in the helicopter drop. The government and the people get “money for nothing”… and Bernanke hopes they’ll spend it. Inflation risks be damned…
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Recommended Links Coming this Thursday: Bill Bonner’s major announcement
On April 14, Bill Bonner is making a major announcement. It has nothing to do with a market crash or credit crisis… but it could have a lasting impact on your wealth and the wealth of your children and grandchildren. Details here.
How to Get a “Cash Rebate” on Virtually Every Purchase You Made in 2015…
Few people are talking about this… but the government just passed legislation that could give you cash back on your consumer spending last year. I’m talking about Christmas presents… lunch with friends… your hotel bill from vacation… even big-ticket items like a new car. “We have been trying forever to get something good for the middle class… and this is a jackpot,” one U.S. senator told The New York Times. But there is one catch… you must act by April 18 to collect your payout. Details on how to do it here. |
Bernanke’s not the only one talking about helicopter drops…
- Reuters reports European Central Bank (ECB) President Mario Draghi called helicopter money “very interesting” last month.
- The Telegraph reports the International Monetary Fund’s (IMF) former chief economist suggests Japan’s central bank will “come under mounting political pressure to fund the budget directly.”
- A recent Bloomberg interview featured a chilling call from Macquarie Securities’ head of Asian Strategies:
Essentially, what the Bank of Japan must do is start offering money to consumers to spend… I think Japan will be the first country in the world to cross this Rubicon… but ultimately the answer for every [country] is the same: Governments must nationalize capital markets.
- And on Monday, the U.S. Federal Reserve held an “expedited” closed-door meeting. Fed Chair Janet Yellen met with President Obama afterward. You can be sure they discussed all stimulus options…
Bottom line: Helicopter money drops are now on the table… and with them is a potential global shift from deflation to inflation.
Stay long gold and the U.S. dollar. And don’t even think of investing in the stock or bond markets without implementing PBRG’s risk-management protocol first…