From Crazy to Crazier

Considering how often “helicopter money” has been mentioned in the mainstream financial press of late, it is probably going to be on the agenda fairly soon. The always dependable Martin Wolf at the FT – who has never seen a printing press he didn’t think could solve all our economic problems – has come out forcefully in favor of the idea. See for instance his recent screed “The case for helicopter money”, followed by the promise – or rather, the threat – that “Helicopter drops might not be far away”.

 

wolf-2The most vociferous establishment mouthpiece for more statism, more central economic planning, and specifically, more money printing: Financial Times chief economics commentator Martin Wolf – a dangerous money crank.

Screenshot via hallsofkarma.wordpress.com

 

What is truly funny is that Wolf actually argues that the money supply hasn’t grown enough! He is pointing to an esoteric money supply measure, so-called “divisia money” – apparently he found the one and only “money supply” measure that is coming to this absurd conclusion. However, money can be clearly defined and identified, and the true US money supply has increased by more than 120% since 2008 (this is to say, more money has been printed in the past 7 years than in the entire previous history of the modern fiat dollar). Here is Wolf:

 

Measures of broad money have stagnated since the crisis began, despite ultra-low interest rates and rapid growth in the balance sheets of central banks. Data on “divisia money” (a well-known way of aggregating the components of broad money), computed by the Center for Financial Stability in New York, show that broad money (M4) was 17 per cent below its 1967-2008 trend in December 2012. The US has suffered from famine, not surfeit.”

 

And this is what this alleged stagnation in money supply growth, a.k.a. the “money famine” actually looks like:

 

Money famineUS money supply TMS-2. Obviously, it is high time the helicopters were warmed up! – click to enlarge.

 

Interestingly, Wolf admits in the very same article that “Central banks can indeed drive the prices of bonds, equities, foreign currency and other assets to the moon”, but he apparently seems to think that no money is needed for doing so. Please note: this guy is actually a trained economist.

After rambling on about the failure of the very policies he has sotto voce advocated to date, Wolf naturally comes to the misguided and dangerous conclusion that even more State intervention is needed. By golly, we will be printed to prosperity, by hook or by crook!

 

[T]he case for using the state’s power to create credit and money in support of public spending is strong. The quantity of extra central bank money required would surely be smaller than under today’s scattergun quantitative easing. Why not employ monetary financing to recapitalise commercial banks, build infrastructure or cut taxes? The case for letting fiscal deficits facilitate private deleveraging, without undue expansion in overt public debt, is surely also strong.

What makes this policy so powerful is the combination of fiscal spending with monetary expansion: Keynesians can enjoy the former; monetarists the latter.”

 

(emphasis added)

The fact that both Keynesians and Keynesians-in-drag “enjoy” this dangerous nonsense is of course precisely why it should be avoided at all costs. As to the question “why not”, we would point A) to sound monetary theory (someone should really send this guy a copy of Mises’ “The Theory of Money and Credit”. It certainly seems he will have to start from scratch if he ever wants to say anything on the topic of money that doesn’t sound like the most moronic idea ever) and B) centuries of experience, beginning with the Roman Emperor Diocletian up to whoever is running Venezuela’s central bank at present.

 

Money cranksFamous money cranks throughout history, who managed to completely ruin entire economies by pursuing the policies Mr. Wolf advocates with the required dedication: Roman emperor Diocletian (who continually lowered the silver content of Roman coins, and then tried to counter the effects with price controls), John Law (a Scotsman who managed to plunge the continental European economy into a more than 60 year long on-and-off depression) and German central banker Rudolf Havenstein (a strong believer in G. F. Knapp’s “State Theory of Money”, the bible of Chartalists, or “modern monetary theorists” as they call themselves today).

 

Conclusion

It was not too long ago when people like Mr. Wolf or Lord Adair Turner (whom Wolf mentions in an appeal to authority – Turner also supports employing the printing press in ever more extreme ways, i.e., he is yet another member of the John Law school of economics) would have been laughed out of the room. Believe it or not, there once was a time when economists actually knew what the difference between money and wealth is and were aware of the dangers of money printing.

However, as the modern-day resurrection of Keynesianism from the grave it was presumed to have disappeared into in the 1970s shows, no economic idea is bad enough not to be warmed up over and over again by statism’s intellectual handmaidens. Mr. Wolf knows most of the bureaucratic and political elite involved in central planning personally, and it is fair to assume that his jeremiads have to be taken as serious warnings of what is actually already in the pipeline.

Prepare accordingly.

 

Chart by St. Louis Federal Reserve Research

 

 

 

Emigrate While You Can... Learn More

 


 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA

   
 

3 Responses to “The Helicopter Wolf at the Door”

  • Crysangle:

    The FT is now owned by Japanese Nikkei , is it not ?

  • DismalScienceMonitor:

    What Martin Wolf and Ben Bernanke failed to tell us about helcopter money was that the choppers were only going to drop the money on the banks that own the Fed, Bank of England, etc., who are also the beneficiaries of NIRP.
    (he seems to want to pretend that banks are going to pay YOU to borrow money from them, but you are not paying his salary. Simple stimulatory mesures such as terminating automatic withholding from workers’ paychecks are never considered, as that would involve putting faith in the people that they would eventually pay their taxes (withholding did not start until WWII, by the way.)

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • What Kind of Stock Market Purge Is This?
      Actions and Reactions Down markets, like up markets, are both dazzling and delightful. The shock and awe of near back-to-back 1,000 point Dow Jones Industrial Average (DJIA) free-falls is indeed spectacular. There are many reasons to revel in it.  Today we shall share a few. To begin, losing money in a multi-day stock market dump is no fun at all.  We'd rather get our teeth drilled by a dentist.  Still, a rapid selloff has many positive qualities.   Memorable moments from...
  • How to Buy Low When Everyone Else is Buying High
      When to Sell? The common thread running through the collective minds of present U.S. stock market investors goes something like this: A great crash is coming.  But first there will be an epic run-up climaxing with a massive parabolic blow off top.  Hence, to capitalize on the final blow off, investors must let their stock market holdings ride until the precise moment the market peaks – and not a moment more.  That’s when investors should sell their stocks and go to...
  • US Stocks - Minor Dip With Potential, Much Consternation
      It's Just a Flesh Wound – But a Sad Day for Vol Sellers On January 31 we wrote about the unprecedented levels - for a stock market index that is - the weekly and monthly RSI of the DJIA had reached (see: “Too Much Bubble Love, Likely to Bring Regret” for the astonishing details – provided you still have some capacity for stock market-related astonishment). We will take the opportunity to toot our horn by reminding readers that we highlighted VIX calls of all things as a worthwhile...
  • When Budget Deficits Will Really Go Vertical
      Mnuchin Gets It United States Secretary of Treasury Steven Mnuchin has a sweet gig.  He writes rubber checks to pay the nation’s bills.  Yet, somehow, the rubber checks don’t bounce.  Instead, like magic, they clear. How this all works, considering the nation’s technically insolvent, we don’t quite understand.  But Mnuchin gets it.  He knows exactly how full faith and credit works – and he knows plenty more.   Master of the Mint and economy wizard Steven Mnuchin and...
  • Why I Own Gold and Gold Mining Companies – An Interview With Jayant Bandari
      Opportunities in the Junior Mining Sector Maurice Jackson of Proven and Probable has recently interviewed Jayant Bandari, the publisher of Capitalism and Morality and a frequent contributor to this site. The topics discussed include currencies, bitcoin, gold and above all junior gold stocks (i.e., small producers and explorers). Jayant shares some of his best ideas in the segment, including arbitrage opportunities currently offered by pending takeovers – which is an area that generally...
  • Seasonality of Individual Stocks – an Update
      Well Known Seasonal Trends Readers are very likely aware of the “Halloween effect” or the Santa Claus rally. The former term refers to the fact that stocks on average tend to perform significantly worse in the summer months than in the winter months, the latter term describes the typically very strong advance in stocks just before the turn of the year. Both phenomena apply to the broad stock market, this is to say, to benchmark indexes such as the S&P 500 or the...
  • The Future of Copper – Incrementum Advisory Board Meeting Q1 2018
      Copper vs. Oil The Q1 2018 meeting of the Incrementum Fund's Advisory Board took place on January 24, about one week before the recent market turmoil began. In a way it is funny that this group of contrarians who are well known for their skeptical stance on the risk asset bubble, didn't really discuss the stock market much on this occasion. Of course there was little to add to what was already talked about extensively at previous meetings. Moreover, the main focus was on the topic...
  • “Strong Dollar”, “Weak Dollar” - What About a Gold-Backed Dollar?
      Contradictory Palaver The recent hullabaloo among President Trump’s top monetary officials about the Administration’s “dollar policy” is just the start of what will likely be the first of many contradictory pronouncements and reversals which will take place in the coming months and years as the world’s reserve currency continues to be compromised.  So far, the Greenback has had its worst start since 1987, the year of a major stock market reset.   A modern-day...
  • Strange Economic Data
      Economic Activity Seems Brisk, But... Contrary to the situation in 2014-2015, economic indicators are currently far from signaling an imminent recession. We frequently discussed growing weakness in the manufacturing sector in 2015 (which is the largest sector of the economy in terms of gross output) - but even then, we always stressed that no clear recession signal was in sight yet.   US gross output (GO) growth year-on-year, and industrial production (IP) – note that GO...
  • US Equities – Retracement Levels and Market Psychology
      Fibonacci Retracements   Following the recent market swoon, we were interested to see how far the rebound would go. Fibonacci retracement levels are a tried and true technical tool for estimating likely targets – and they can actually provide information beyond that as well. Here is the S&P 500 Index with the most important Fibonacci retracement levels of the recent decline shown:   So far, the SPX has made it back to the 61.8% retracement level intraday, and has weakened...
  • Update on the Modified Davis Method
      Whipsawed Frank Roellinger has updated us with respect to the signals given by his Modified Ned Davis Method (MDM) in the course of the recent market correction. The MDM is a purely technical trading system designed for position-trading the Russell 2000 index, both long and short (for details and additional color see The Modified Davis Method and Reader Question on the Modified Ned Davis Method).   The Nasdaq pillar...   As it turns out, the system was whipsawed,...
  • Market Efficiency? The Euro is Looking Forward to the Weekend!
      Peculiar Behavior As I have shown in previous issues of Seasonal Insights, various financial instruments are demonstrating peculiar behavior in the course of the week: the S&P 500 Index is typically strong on Tuesdays, Gold on Fridays and Bitcoin on Tuesdays (similar to the S&P 500 Index).   The quest for profitable foresight...[PT]   Several readers have inquired whether currencies exhibit such patterns as well. Are these extremely large markets also home to...

Support Acting Man

Item Guides

Top10BestPro
j9TJzzN

Austrian Theory and Investment

Archive

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com

Diary of a Rogue Economist