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Free Money Dumped From Helicopters: An Idea That Won’t Go Away

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{I}n a country (and world) drowning with debt, there are only two options to extinguish said debt: inflate it away or default. Anything else is kicking the can while making the problem even worse.

Zero Hedge

It was none other than the renowned free market capitalist, Milton Friedman, who first postulated the idea that the Federal Reserve should just throw free money from helicopters and let the citizens gather it up and spend it to drive up demand. Friedman made this bizzare proposal (somewhat tongue-in-cheek) in a book he co-authored in 1963, in which he was explaining how the Fed caused and prolonged the Great Depression with their monetary policies. He said the Fed would have been better off to just throw free money out of helicopters. Of course, years later, Fed Chairman, Ben Bernanke, was tagged “Helicopter Ben” when he made reference to Friedman’s proposal.

The problem with Bernanke’s helicopter (now Ms. Yellen’s helicopter) is that it only hovers over Wall Street and for six years the only ones to benefit from the Fed’s free money has been Wall Street.

The quote from Zero Hedge at the top of the page comes from an article that tells us that there is now a new entity proposing to keep free money flowing except this entity wants to move the helicopters from Wall Street to Main Street.  Who is this good Samaritan? Believe it or not, the proposal is being made by the most influential and dangerous think-tank mankind has ever known _ the Council on Foreign Relations. Why is the Council on Foreign Relations (CFR) making a proposal on monetary policy? That’s a good question and we will endeavor to suggest an answer. CFR published its proposal yesterday in an article with this really catchy  title:

Print Less but Transfer More

Why Central Banks Should Give Money Directly to the People

Wow! Since when has the CFR been a friend of the good folks on Main Street? If you take the time to read the CFR article, believe me, you will find yourself agreeing with almost every point it makes. That’s because the CFR article is a condemnation of everything the Fed (Barnanke and Yellin) have been doing monetarily for the last six years; just like many of us have been writing about since 2008. The Fed’s policy of dumping free money on Wall Street has not produced the promised recovery, has it? And, the CFR makes the point we all agree with that the Fed’s policy has exacerbated the wealth gap in America by making the rich richer. So, what is the CFR  proposing?

Instead of trying to drag down the top, governments should boost the bottom.

Well, all right! There is a populist idea that any politician will love. Notice that it is “governments” plural! The idea is coming from CFR after all.

The beauty of their plan they say is that it doesn’t require Congress go through another battle of whether to raise taxes or cut spending or  even to have to pass some 2000 page bill. It only requires the President or the Treasury Secretary to pick up the phone and call the Fed and make the request to create some new money  that the government coul then pass out to the bottom 80% wage earners (the good folks on Main Street). The CFR says that the Fed would actually be creating new money at a lessor rate than it is now because those lower wage earners will rush out and spend that free money and the economy will see a 1.3 multiplyer effect. Demand for goods and service will rise and employers will hire more workers to keep up with the new demand and the economy, I suppose, will finally reach escape velocity. Who said there’s no such thing as a free lunch?

So, what’s the catch? Won’t all this new free money cause run away inflation? Not to worry says the CFR. The Fed will still have its monetary tools for raising interest rates to combat any signs of inflation. But, the CFR doesn’t think even that will be necessary. They support their argument by point out after six years of Quantitative Easing and Zero Interest Rate Policy (ZIRP), the Fed created trillions of new dollars and there’s been no real inflation.

Oops! That argument, my friends, is pure unadulterated BD (Bovine Droppings). This humble observer of the asylum we all have to live in does not believe and you should not believe that the CFR believes their own BD, for one moment. They definitely know better. The people who make up the CFR may be bent and twisted, but they are not stupid. They know that most of those trillions of funny money are sitting in the excess reserve accounts of the To Big To Fail or Trust Banks. That money has never circulated in the general economy. The banks choose not to take the risk of lending that money for too much risk and too little return (thanks to ZIRP) so they borrow from their own accounts at nearly zero interest and leverage it i the derivatives markets that they themselves manipulate and make  a tonne of money with very little risk. But, when the Fed starts dumping free money on Main Street, it will enter the general economy and it will have an inflationary effect and the Fed will raise interest rates and then the banks will see opportunities for lending these other trillions and yes, my friends, inflation will go into hyper drive. The CFR knows that. The masters behind the curtains, for whom the CFR really works, know that. This will be the last stage of crippling the dollar as the international reserve currency and usher in their plans for a new world reserve currency.

Dear friends, do read the CFR article. It is a masterpiece. It is a work of art. When our Congress critters and our “Redistribute the Wealth” President read this proposal from CFR, they will see the answer to all of their prayers. They will see this idea as mana from heaven. They will fall all over themselves to get this plan implemented.

This free money plan from the CFR will actually work. It will do all the wonderful things they say it will do. It will work and it will keep working right up to the day it doesn’t work anymore; when inflation goes hyper.

Enjoy the ride, my friends, But, know this. Once the ride starts, there will be no getting off until the bitter end.

Well, that’s what I’m thinking. What are your thoughts?

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