{"id":36232,"date":"2013-02-18T20:00:48","date_gmt":"2013-02-19T01:00:48","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=36232"},"modified":"2013-02-18T20:00:48","modified_gmt":"2013-02-19T01:00:48","slug":"financial-drone-attack","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/02\/18\/financial-drone-attack\/","title":{"rendered":"Financial Drone Attack"},"content":{"rendered":"

By Bill Bonner<\/strong><\/p>\n

Oh la la! Things are heating up. Subjects that used to be confined
\nbehind closed doors… discussed only in whispers… and only among
\nrogues and scalawags… are now right out in the open.<\/p>\n

Politically, we’ve got the Obama administration openly “legalizing” the right to kill Americans<\/a><\/strong>
\nwithout first charging them with a crime. It used to be called
\n“murder.” Now, according to administration lawyers, it’s completely
\nlegal!<\/p>\n

Asked whether this gave the agency the authority to kill<\/a><\/strong> an American citizen on American soil without any due process of law, the CIA’s new director wouldn’t say. He mumbled.<\/p>\n

Sen. Rand Paul threatened to block the nomination if he doesn’t get a
\nstraight answer. But what difference will an answer, straight or
\ncrooked, make? The feds are out of control… and there isn’t anyone
\nwith the will or the power to bring them to heel.<\/p>\n

Out of Control<\/h3>\n

Financially, the feds and the Fed are out of control too. And not
\njust in the U.S. Central bankers all over the world are loading their
\ndrones with cash.<\/p>\n

And now we’ve got the world’s leading opinion mongers openly advocating things that used to be a joke… or a crime.<\/p>\n

Last week, Adair Turner, head of Britain’s Financial Services
\nAuthority (equivalent to the SEC in the U.S.) came out in favor of
\n“helicopter money.” CentralBanking.com has the story:<\/p>\n

“Overt monetary financing'” —
\nprinting money to pay the government’s bills — should not be considered
\na taboo subject, and in many cases is a viable stimulus option,
\naccording to Adair Turner, the chairman of the UK’s Financial Services
\nAuthority (FSA).<\/em><\/p>\n

Speaking last night at the Cass
\nBusiness School in London, Turner — who was a candidate to succeed
\nMervyn King as governor of the Bank of England, before the appointment
\nof Mark Carney — focused on the controversial topic of “helicopter
\nmoney,” a term coined by economist Milton Friedman, who once suggested
\ngovernments could fight deflation by scattering newly printed notes out
\nof helicopters.<\/em><\/p>\n

While Turner was careful to hedge his
\nremarks with considerations of the various risks surrounding monetary
\nfinancing, he came down clearly in its support. “I think there are some
\ncircumstances — they may be extreme circumstances — where you should
\nuse helicopter money,” he said.<\/em><\/p>\n

Then, yesterday, Martin Wolf — the lead economist at the Financial Times<\/em>, and one of the “100 Most Influential” people on the planet — weighed in heavily:<\/p>\n

First, it is impossible to justify the
\nconventional view that fiat money should operate almost exclusively
\nvia today’s system of private borrowing and lending. Why should
\nstate-created currency be predominantly employed to back the money
\ncreated by banks as a byproduct of often irresponsible lending? <\/em><\/p>\n

Why is it good to support the
\nleveraging of private property but not the supplyof public
\ninfrastructure? I fail to see any moral force to the idea that fiat
\nmoney should only promote private, not public, spending.<\/em><\/p>\n

Second, in the present exceptional
\ncircumstances, when expanding private credit and spending is so hard,
\nif not downright dangerous, the case for using the state’s power to
\ncreate credit and money in support of public spending is strong. <\/em><\/p>\n

The quantity of extra central bank
\nmoney required would surely be smaller than under today’s scattergun
\nquantitative easing. Why not employ monetary financing to recapitalize
\ncommercial banks, build infrastructure or cut taxes? The case for
\nletting fiscal deficits facilitate private deleveraging, without undue
\nexpansion in overt public debt, is surely also strong. <\/em><\/p>\n

Cancer sufferers have to undergo
\ndangerous treatments. Yet the result can still be a cure. As Lord Turner
\n[chairman of the Financial Services Authority] notes, “Japan should
\nhave done some outright monetary financing over the last 20 years, and
\nif it had done so would now have a higher nominal gross domestic
\nproduct, some combination of a higher price level and a higher real
\noutput level, and a lower debt to gross domestic product ratio.”<\/em><\/p>\n

The conventional policy turned out to
\nbe dangerous. Whether this is also true of troubled countries today can
\nbe debated. But the view that it is never right to respond to a
\nfinancial crisis with monetary financing of a consciously expanded
\nfiscal deficit — helicopter money, in brief — is wrong. It simply has
\nto be in the tool kit. <\/em><\/p>\n

The Gono “Solution”<\/h3>\n

How do you like that? Wolf thinks an economy is a machine. He reaches into his tool kit and what does he find? A drone!<\/p>\n

So the banks won’t lend? People won’t borrow? Consumer demand doesn’t
\nincrease? Jobs aren’t created? No worries — we’ll take out the
\ndrones… load them with cash and drop it all over the world. Spend,
\nspend, spend until the economic problem goes away.<\/p>\n

Is this a dangerous treatment? Yes, of course. But “cancer sufferers
\nhave to undergo dangerous treatments,” says Wolf, so why not an entire economy<\/a><\/strong>?<\/p>\n

And think of the benefits. Money goes directly to worthwhile
\nprojects… and into consumer pockets. People get jobs. Things get done.
\nBridges get built. And the federal deficits disappear. The feds don’t
\nborrow from the Fed. They just spend the money.<\/p>\n

Dear readers will recognize this as the policy of Mr. Gideon Gono of
\nthe Central Bank of Zimbabwe. They will also recall that it was
\ndisastrous. But Wolf must imagine that he and the other elite
\npolicymakers and policy implementers are much smarter and more
\ndisciplined than Gono.<\/p>\n

Gono’s money drones took off from Harare and headed directly for the
\narmy barracks. Then, when inflation was getting out of control, his
\nmonetary policy was out of his control too. He couldn’t stop paying the
\narmy!<\/p>\n

How will it be any different in London or Washington? Mr. Wolf doesn’t say.<\/p>\n

Release the Choppers!<\/h3>\n

But here’s another voice, Anatole Kaletsky, with more support for “helicopter money”:<\/p>\n

Public discussion of helicopter
\nmoney has been taboo among economic officials. The one exception was a
\nspeech by Ben Bernanke in 2002, before he became Fed chairman. This
\nspeech offered the most detailed and eloquent justification of monetary
\nfinancing prior to Turner’s, and it earned Bernanke the Wall Street
\nnickname “Helicopter Ben.” Since then, however, helicopter money has
\nnever been seriously mentioned by any senior official in any advanced
\neconomy. Until this week. <\/em><\/em><\/p>\n

 <\/p>\n

Ten years after the Helicopter Ben
\nspeech, Turner has broken the taboo about monetary financing. The
\neffect on economic debate around the world could be irreversible and
\nprofound. Turner’s 70-page paper presents the arguments for the many
\nvariants of helicopter money with unprecedented academic sophistication,
\nfinancial detail and historical context. <\/em><\/p>\n

Now that Turner has broken the taboo
\non helicopter money, the sound of monetary salvation should soon be
\nheard round the world. <\/em><\/p>\n

Our guess is that the helicopter money will come. So will the
\ndrones. Serious money policies and decent people… will both get blown
\nup.<\/p>\n

Regards,<\/p>\n

\"Bill<\/p>\n

Bill<\/p>\n

http:\/\/www.billbonnersdiary.com\/<\/a><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By Bill Bonner Oh la la! Things are heating up. Subjects that used to be confined behind closed doors… discussed only in whispers… and only among rogues and scalawags… are now right out in the open. Politically, we’ve got the Obama administration openly “legalizing” the right to kill Americans without first charging them with a … <\/p>\n

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