In “Cries for more money creation grow louder,” (Feb. 29, 2016) I noted that Financial Times chief economic commentator Martin Wolf called for central banks to deposit money directly into the accounts of all adults in an effort to stimulate economic activity.
Now, John Mauldin, noted publisher of numerous advisory services, recently wrote that former Fed chairman Ben Bernanke was in Japan recently and may have urged just that. While there, Bernanke had private meetings with Prime Minister Shinzo Abe and Haruhiko Kuroda, head of the Bank of Japan.
Japan’s policies of fiscal deficits, zero interest rates and quantitative easing clearly are failing to get Japan’s economy moving. “Greater boldness” is what Wolf calls for, and “helicopter drops” of money into checking accounts would be the boldest move imaginable.
If such a thing is implemented, I guarantee that those in favor of it will promise that it will be “a one-time event.” But, it will not.
During the French Revolution and Germany’s hyperinflation (1917-1921), the two most infamous instances of the printing of huge quantities of paper money to stimulate economic activity, there were cries for still more to be printed. It’s has always been the same. If larger quantities had been printed, paper money advocates argue, the programs would have been successful.
If the Japanese go with helicopter drops, I can hear Paul Krugman telling them that not enough money was deposited. During the WFC in 2008, he called for the Fed to print $9 trillion. The Fed printed only about $4 trillion.
Ben Bernanke became notorious for talking about “helicopter money,” but the concept was discussed decades ago by Milton Freedman, thereby giving it more credibility with the establishment. Now, will we see it implemented?
I have no idea if Japan will go down this road, but it would not be much of a stretch from zero interest rates and quantitative easing. In such an environment, gold and silver will do very well. Perhaps the metals recent price rises have already portended still more extreme moves in the establishment’s flawed thinking that economies can be “managed.” They cannot.