Saturday, August 20, 2016

Simon Wren-Lewis — Helicopter Money: missing the point

Simon Wren Lewis makes an important point. Helicopter money as funds injected directly in the economy at the discretion of the central bank acting independently is different from money finance fiscal stimulus through government spending decided by the government (legislative appropriation)

HM is purely technocratic and MFFS is democratic. Macroeconomists that subscribe to this POV hold the conservative position that that democracy cannot be trusted with the purse, so a technocratic solution that is independent of democratic control or influence is required in the  case of HM. 

This implies that a macroeconomist cannot be an actual liberal but only a faux liberal after the manner of Blair's Labour that triangulated with respect to Thatcher's Tories and became Tory-lite, just as did Bill Clinton in adopting Rubinomics.

Mainly Macro
Helicopter Money: missing the point
Simon Wren-Lewis | Professor of Economics, Oxford University


Kaivey said...

I've been robbed by the banks most of my adult life. Sure my house is with a lot, in paper money, but I would have to sell it and live where no one wants to live to get some of the money back.

And even if it was worth a few million that would make no difference to me. I would still be poor because I would not sell it as all the other houses like mine would cost the exactly the same, and I wouldn't want to sell it because it is my home and the area is where my friends and family live.

I never wanted to make money, which is worthless paper money anyway, I always just wanted somewhere nice to live.

But to have somewhere nice to live I had to do tons of overtime to be able to pay the mortgage. I was turned into a slave and I only had money if I worked six days a week at twelfth hours a day, or more.

The system was all wrong which was set by the aristocracy purposely to extract the maximum amount of money out of people.

So I want my money back, the robbing bastards, and they should be made to pay up, or the government should make the helicopter money which should be worth thousands, not a few, but loads.

There are millions of people like me - most of the nation in fact - who had most of their spending money taken away by the bankers, so the economy always tanked.

Ignacio said...

Kaivey, people voted that system. A percentage of the population wants and profits from asset appreciation specially housing.

I'm not talking about the "1%", I'm talking about 20%-30% of the population, many consistently vote and push for policies that keep the system rolling as it is, because "it's fine" for them.

People loves their paper wealth and wealth effects, the illusion of "richness". Is all stupidity and hypocrisy, but is what it is, our species is too dumb to recognise zero-sum games, sot he plebe is fooled time to time during a period in which things apparently "work fine", mind you that all this was made just possible because of an excess of carbon-based energy being stockpiled during millions of years.

When entropy catches up that stupidity is made impossible. Stupidity is a function of entropy, if you mind.

Andrew Anderson said...

I agree HM should be done fiscally with 0% yielding sovereign debt sold directly to the central bank to finance it. Later, as tax collections improve, the debt can be bought back by the monetary sovereign.

Tom Hickey said...

Kaivey, people voted that system. A percentage of the population wants and profits from asset appreciation specially housing.

As Marx pointed out, the tendency is for the petite bourgeoisie to identify with the haute bourgeoisie by aspiration instead of with the proletariat by actual interests.

In a modern developed society this is because many workers own assets. It was a clever way for the rentier class to co-opt the upper end of the working class.

Neil Wilson said...

"But to have somewhere nice to live I had to do tons of overtime to be able to pay the mortgage."

You rent the money or you rent the bricks. Either way you have to pay for somewhere to live. It's never free and never has been.

If you rent the money then inflation lowers your rent over the years as a percentage of your income. Controlling inflation now means that the rent has been lowered as a percentage of your net wealth.

So the bankers aren't entirely to blame. All those people who wanted house prices to rise so they felt superior are the main culprits.

Rationally nobody should want house prices to rise, because it means that the next upgrade is always further out of reach.

Neil Wilson said...

It always entertains me that Wren-Lewis never mentions the auto-stabilisers.

He has a real cognitive dissonance blind spot about them - because of course they inject government money automatically into a system on demand, but they do it via the fiscal authority not the monetary one (which just plays a passive role of clearing the cheques) and largely to the poor and dispossessed rather than the wealthy.

Point out how much a Job Guarantee stabilises the spend side because of its high wage that stops being paid as soon as the individual gets a job in the private sector. Watch how he ignores the obvious point.

Auto-stabilisation requires *no* human intervention whatsoever. You decide the policy rate and it is completely free running and self-balancing. It is direct, immediate - and worst of all it works a treat.