The Cleveland Fed’s Loretta Mester is a clueless apparatchik and Fed lifer, who joined the system in 1985 fresh out of Barnard and Princeton and has imbibed in its Keynesian groupthink and institutional arrogance ever since. So it’s not surprising that she was out flogging – -albeit downunder in Australia – – the next step in the Fed’s rolling coup d etat.
We’re always assessing tools that we could use,’ Mester told the ABC’s AM program. ‘In the US we’ve done quantitative easing and I think that’s proven to be useful.
‘So it’s my view that [helicopter money] would be sort of the next step if we ever found ourselves in a situation where we wanted to be more accommodative.
This is beyond the pale because ‘helicopter money’ isn’t some kind of new wrinkle in monetary policy, at all. It’s an old as the hills rationalization for monetization of the public debt – – that is, purchase of government bonds with central bank credit conjured from thin air.
It’s the ultimate in ‘something for nothing’ economics. That’s because most assuredly those government bonds originally funded the purchase of real labor hours, contract services or dams and aircraft carriers.
As a technical matter helicopter money is exactly the same thing as QE. Nor does the journalistic confusion that it involves ‘direct’ central bank funding of public debt make a wit of difference.
This post was published at David Stockmans Contra Corner by David Stockman ‘ July 13, 2016.
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