Sunday, February 22, 2015

Brian Romanchuk — Helicopter Money Does Not Exist. And If It Did, It Would Be A Bad Idea.

Continuing an ongoing discussion in the comments here.

Bond Economics
Helicopter Money Does Not Exist. And If It Did, It Would Be A Bad Idea.
Brian Romanchuk


Ralph Musgrave said...

He's talking thru his rear end. I left a comment there.

NeilW said...

It boils down to the standard belief of this class of people - that financing should be provided by Very Clever People because only Very Clever People really know how things work.

That is the entire premise for the 'independence' of the central bank in the first place - that those running and advising bankers are Solomonesque and will always have the best interests of the whole economy at heart when they make they ever so Wise decisions. Unlike those nasty politicians who won't take the 'hard' decisions.

And as we've seen the decisions they make favour their class of people - bankers and rich people.

So now we have the Latte Set who want to implement the same structure but with them in charge making the decisions. And unsurprisingly the decisions they propose really help their class - debt jubilees, income guarantees and helicopter money.

Neither of these classes like democracy, because that elects politicians who will unsurprisingly make the financial decisions that get the mass of people to support them. And some of those decisions might hurt the interests of the Latte Class and the Banker Class.

But what the two classes who would like to rule don't realise, because they refuse to look in the mirror, is that they make precisely the same decisions as politicians. Just as bad and just as biased - like the Barons before them- who we took centuries to eradicate from power.

Which is why letting politicians do their thing is the least bad approach, because at least all of us do have a say in who they are and whether they stay in position.

Democracy is still the least bad way of running a monetary system. The leak of financial power to unelected bureaucrats and so-called experts needs to be stopped and reversed.

Otherwise, as we have seen in Greece, the democratic will of the people can we completely overridden.

peterc said...

After all the claims of monetary policy effectiveness, some now want fiscal powers to be given to the monetary authorities.

Presumably the motives are:

(i) hatred of democracy;

(ii) a desire to keep pretending that "monetary" policy really is effective.

Brian Romanchuk said...


I am unsure who you are referring to, but I believe tha parliament is supreme when it comes to spending money, and it should stay that way.

I did not talk about "normal" discretionary policy in my article, as it always is going to exist. It was implemented during the crisis in the developed countries, it was only later that the the austerity nutters got out of control. And one might point out that austerity is discretionary fiscal policy.

But wehave to be realistic; discretionary fiscal policy will not completely abolish the business cycle.

Matt Franko said...

Scott Fullwiler has the definitive paper here wrt how it works in US at least:

NeilW said...

"discretionary fiscal policy will not completely abolish the business cycle."

Nobody is saying it will or that it should. In fact the MMT Job Guarantee is specifically there to ensure that the business cycle ends when it should - rather than being dragged out because of 'job loss' fears - and catch the fall out including moving those whose skills become obsolete to a lower earning level.

But what discretionary fiscal policy can do is stop the 'boom' bit of the business cycle from over bidding the capacity of the economy. You run it a bit tighter than you otherwise would do because the non-discretionary Job Guarantee bridges the gap automatically.