Tuesday, September 9, 2014

Dylan Matthews — To fix the economy, let's print money and mail it to everyone


On the Mark Blyth and Eric Lonergan proposal for helicopter drops.
It's undemocratic, they concede — but then again, so's the current system. "We live in this bizarre world already where central banks are tasked with everything," Blyth says. "We can philosophically bemoan this fact, and I do bemoan it, or we can accept it and say, if you really want these guys to be the last economic institution standing, give them the tools they need." 
Lonergan adds that in an important way, giving people cash rather than spending on bonds is more democratic. Whereas today, European Central Bank chief Mario Draghi is "trying to force businesses and households to borrow and force savers to take on risks they don't want to take," under the helicopter drop proposal "spending decisions [would be] decentralized to households."…
Intrigued? Be sure to check out the full transcript of my, Lonergan, and Blyth's conversation by toggling here. Be sure to also check out Reihan Salam's discussion of the idea at National Review.

9 comments:

Matt Franko said...

Hey moron left-wingers: Been there, done that...

"Bush signs stimulus bill; rebate checks expected in May."

http://www.cnn.com/2008/POLITICS/02/13/bush.stimulus/

""The bill I'm signing today is large enough to have an impact, amounting to more than $152 billion this year, or about 1 percent of the GDP (gross domestic product)," the president said in the brief ceremony in the East Room of the White House.

The government hopes the measure, which will send most Americans tax rebate checks by May, will either prevent a recession or make one relatively brief.

The package also includes tax breaks for equipment purchases by businesses, as well as payments to disabled veterans and some senior citizens.

The bipartisan measure moved through Congress at relative break-neck speed, going from initial discussions to enactment in less than four weeks.

The package will pay $600 to most individual taxpayers and $1,200 to married taxpayers filing joint returns, so long as they are below income caps of $75,000 for individuals and $150,000 for couples. There is also a $300 per child tax credit.Video Watch Bush sign stimulus bill into law »

The rebates will put about $120 billion in the hands of individuals in the hope that they will spend it and boost a faltering U.S. economy."

?!?!?!??

VOX finally catching up on 6 year old news....

Morons in academe of economics blind as usual... they have to "write a paper...."

Moron left: Try to get Obama off the golf course and have him sell a similar package...

Tom Hickey said...

Matt, they know that. The paper is about the cb using fiscal when the Congress is deadlocked and unable to do anything fiscally expansionary with the GOP running the House, where appropriations originate. They say that they would prefer the democratic process in doing fiscal, but when the process has broken down, then the cb can and should step in.

I am of two minds on this. On one hand, I agree that it's crazy to let the world fester over principle when it would be possible for the central banks to do it. On the other hand, going that route is a giant step toward technocracy and another nail in the coffin of democracy.

But it's clear that the political process has broken down in the US, UK, and EZ to the degree that relief can now only be expected in a timely fashion from central banks going fiscal and doing actual helicopter drops, regardless of the inflationistas going ballistic.

However, it's questionable whether central banks actually have the spine to do this for fear of losing their independence if they go fiscal.

Ignacio said...

Schauble & lamers (inc. Bundesbank which controls the ECB) will never allow this in the EZ. Never.

But maybe the FED could do it worldwide via currency swaps? I don't think this would be good in the long term for the USA population though for many reasons.

Matt Franko said...

Tom what are the two transactions at the Fed?

credit TGA or credit bank account of person x and debit what?

This will never happen they run the Fed like a factoring firm with a "balance sheet".... the only "income" they get is from the portfolio and they return that for "deficit reduction"... and as we know 'helicopter drops are fiscal', etc...

And the process is not "broken down" it works fine we have the 2008 track record as evidence...

It doesnt work from the golf course that is for sure...

How hard would it be to pound the GOP with a proposal for the exact same thing as we did in 2008? You could use Bush's own words in the debate... but not from the golf course....

The left is inept and hopeless... all heart and no brains, you need both...

The left will go thru any hypothetical mental gymnastics instead of applying pressure to their elected representatives to get to work...

rsp,

Tom Hickey said...

Matt, it could be funded from profits, e.g., resulting from interest through QE, returning the interest on the purchased bonds to the public directly instead of to the public indirectly by payment of operating profit to the Treasury. That hasn't been chump change.

Matt Franko said...

Well Tom that flow should start to resume and then begin to grow next month when they end the QE... why go thru all the "helicopter drop" mental hijinks?

If they stop the buying and then let the bonds redeem then the non-govt will get the rollovers at the higher interest rates and any net new issues likewise will have to go to the non-govt... so they could just stop what they are currently doing and this should help starting October...

Total UST interest paid FYTD is a bit over $200B.... probably a bit less than half of that goes to the Fed.... then there is the same effect on the MBS they are buying.... ie doing nothing would be better than what they are doing....

Flows will increase to the non-govt when they end the QE.... no helicopter drops needed...

granted it will not be as friendly to the Piketty type people as Bush's 'drop' which was capped at the high end of moderate income levels...

The Fed's accounting process does not allow for this type of CB helicopter drop (no "Reserve Balance Assets" account at the Fed itself....they need govt bonds as "assets" to factor ) not sure about the ECB but that is their problem we have enough of our own....

rsp,

Tom Hickey said...

What's the ratio of saving to spending on the interest paid out? If most of it is saved, then no effect wrt effective demand.

The issue is to get funds into the hands of people that will spend it quickly.

Matt Franko said...

What good is this fantasy "helicopter drop" exercise by these people? It will NEVER happen...

Look at what the GOP did in 2008 they put a package together and sold it... its easy.... if you are not on the golf course... (TIP: include something for everybody...)

Tom Hickey said...

IF the GOP were putting the package together it would be easy. Right now they are the party of no.

Now if the Democrats said that under no circumstances would they approve of a another free handout, you can bet the GOP House would immediately pass one and dare the Senate Democrats to vote it down or the president to veto it.