The Helicopter Has Already Been Tested – – And It Has Failed Spectacularly

Most of what passes for modern monetary policy is nothing more than one assumption piled upon another (and then another, and so on). Taken for granted for so long, rarely are these unproven precepts ever challenged to justify themselves to the minimal standard of internal consistency, let alone prove discrete validity by parts. The latest is ‘helicopter money’, another sham in a long line of them proffered by at least one central bank today because it knows, as the others, nothing they have done has worked.
The fact that the world is even discussing the helicopter option should instill great skepticism as a first impulse, not more rabid faith. The way this latest scheme is being described is exactly the same as quantitative easing was really not that long ago. Clearly the expectation for it is rising, as Bloombergreported today that, ‘Nearly one-third of clients and colleagues surveyed by Citigroup Inc. think that so-called helicopter money could be on its way within a fortnight.’ Forty-three percent in the same survey believed that the ‘market’ was expecting it.
To do what? That is the question that is never asked because it is just accepted by economists and their media that the helicopter, as QE, will perform as designed even though the last almost decade has proven beyond doubt that never happens.
Separately, Bank of America Merrill Lynch Chief Investment Strategist Michael Hartnett opined that helicopter money would be the best option to bring money into risk assets, a common goal of monetary stimulus, particularly of the unconventional variety.
Stocks are at record highs, and had made them regularly following QE3. And it didn’t have any impact on the economy whatsoever. The most charitable supposition is that it might have been worse (jobs saved rather than created) had stocks more accurately reflected even earnings rather than unhinged forward versions of them. Even that is dubious, because the entire idea of monetarism is nothing more than assumptions never before tested in the real world. QE sounded nearly fool-proof in the laboratories of Ivy League universities; put into action it has left many pining instead for something else.

This post was published at David Stockmans Contra Corner by Jeffrey P. Snider ‘ July 19, 2016.