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Time for the Nuclear Option: Raining Money on Main Street


#1

Time for the Nuclear Option: Raining Money on Main Street

Ellen Brown

Predictions are that we will soon be seeing the “nuclear option” — central bank-created money injected directly into the real economy. All other options having failed, governments will be reduced to issuing money outright to cover budget deficits. So warns a September 18 article on ZeroHedge titled “It Begins: Australia’s Largest Investment Bank Just Said ‘Helicopter Money’ Is 12-18 Months Away.”


#2

Humans have been pushed to their limits to the point of physical and mental exhaustion. They simply can not be made to take on the increase in activity that would sate the economics as usual, with its thirst for excesses. The hate card is being deployed largely to incite activity, but can only work for so long given the exhaustion of society. I don't know exactly what the future holds, but I suspect it will be slower in nature and that will be a good thing, perhaps allowing civility and civilization to regrow.


#3

From the article: "Quantitative easing (QE) attempts to re-inflate the money supply by giving money to banks to create more debt, but that policy has failed. It’s time to try dropping some debt-free money on Main Street." I do not know if QE is done differently in Australia than here, but here in the US QE involves the Fed purchasing assets and is quite different from having a zero % interest rate in giving money to banks. Here in the US, the use of "Helicopter Money" for Main Street is normally a job for Congress and monetary policy. Unfortunately, our Republican Congress has no interest in using this tool. We are relatively lucky here in the US that private sector job growth has been on such a nice steady climb. Of course the slowness of this climb has made life much more difficult for many than it needed to be. A wiser, less partisan group in Congress, could have mitigated a lot of pain.


#4

Thank you Ellen Brown.

In the end, Economics is really a political system. The American implementation of Economics has produced extreme income inequality (Slavery lives! It's just economic slavery now.)

PQE is an economic policy that creates debt free money and eliminates the Wall Street leeches.

It's not "trickle down," it's "trickle all over." It's what free people can do.


#5

The Fed could actually do QE for infrastructure. In 2010, Section 13(3) of the Federal Reserve Act was modified by the Dodd-Frank Act as follows:

"Only Broad-Based Facilities Permitted. Section 13(3) is modified to remove the authority to extend credit to specific individuals, partnerships and corporations. Instead, the Board may authorize credit under section 13(3) only under a program or facility with “broad-based eligibility.”

According to Prof. Tim Canova, an expert in Fed legislative history, this evidently means, for example, that lending only to a specific auto company (GM) or a specific utility company (GE) is prohibited, but lending to all auto companies or all utilities companies might be allowed. Lending for infrastructure -- either directly or to federal or state governments for the purpose of engaging in infrastructure -- might qualify as an extension of credit with “broad-based eligibility.”


#6

Thanks for the info, Ellen Brown.


#7

The Fed could also do QE for single payer medical insurance, thereby encouraging droves of older workers to retire (who are currently delaying retirement from their family wage jobs solely to keep their employer sponsored medical insurance) thereby opening more good jobs for young Americans. More Americans would start small businesses if single payer freed them from their government or corporate jobs that have a huge advantage in the current insurance market.

Employer sponsored medical insurance continues to be a ball and chain dragging down the main street US economy.


#8

While I agree that QE for people (or OMF) is long overdue, at this point, not all the inflation objections are "bogus". The failure to help the homeowners stay in their homes early in this crisis, followed by the purchase of much of the foreclosed housing by large Wall Street financed firms, has led to high inflation in rents in quite a lot of communities now in the USA as demand for rental housing has soared due to all the evicted homeowners seeking rental housing.

I don't have a simple solution to that problem at this late date. I believe it would have been much easier early in this crisis to combine debt writedowns on homes with outright "QE" for struggling homeowners to contain the collapse in home ownership without risking extreme rises in house prices. But now that ownership has passed to massive landlords, the problem is more difficult.

I'm not trying to kill the idea of QE for people. I'm merely pointing out we do have a real problem now with inflation in rents, and a people's QE is going to have to try to address this, or risk even worse inflation. I hope someone else has some ideas on how to deal with this. Perhaps a program to return people to homeownership is part of the answer, but the large landlords have once again driven housing prices way up, which complicates the issue.

See this report about rents.


#9

"Willem Buiter, chief global economist at Citigroup, is also recommending “helicopter money drops” to avoid an imminent global recession,..."

Buiter sees China's troubles as the main cause of a spreading global recession. Krugman calls Buiter a "very smart guy," but disagrees on the likelihood of a major catastrophe.


#10

Did you even read this article? Your comment has NOTHING to do with the highly creative remedy that Ms. Brown elucidates.


#11

Bernie, you need Ellen Brown.


#12

Yes there inflation in the rental market but that too can be addressed via QE for the people.

Prices go up because more are renting even as supply not increasing.

Have the Government print up money to build low cost rentals and that rise of rents stops .

The builders of rental accommodations have already made back the cost of investment and more in the way of profits so seek to extort even more in the way of profits by hiking rents . There nothing wrong with giving the renter a choice of renting in publicly owned housing.

The ability to keep hiking rents on already paid for housing by the investor class to ever higher levels is a disincentive for them to invest in new rental accomodations


#13

Public housing in my home city was done away with in the last decade. (Rents there are so astronomical that is the major reason I cannot afford to live there anymore.) They were replacing it with "mixed income" housing with starting prices at $950/month for a 1 bedroom apartment. Without subsidies, I don't know how a low-income person can afford it. Most corporate-owned apartment communities require renters to make (at least) 2 1/2 to 3 times the amount of rent in income to be approved for a lease.
It is a conscious effort to remove the poor from sight and mind.
Public housing units in the suburbs are so scarce and the wait is unbearable. Trying to get Section 8 - the windows for application are very rare and narrow - is like playing the lottery. With so many low-wage earners filling the rental market, and often having to "bunk up" just to make the rent - building more public housing seems like a logical step.
I would also like to see rent-controlled housing and more stringent guidelines for landlords.
In the suburbs of my home city, I have heard of neighborhoods of "McMansions" being depopulated because of foreclosures. With so many people homeless, why not squatting?

If they want consumer spending to boost the economy, give people decent paying jobs and affordable healthcare benefits, this way they can afford to spend with cash rather than creating a debt bubble with the use of credit cards.


#14

The imbalance has led to the one percent accreting more than is sustainable at the expense of the 99%.
The solution to me seems that there should be a wealth tax. 1% of the 1%'s gains since QE?


#15

Yes, the government could include low cost housing as an infrastructure project. Even the threat of this might put a damper on Wall Street speculators buying up all the foreclosed properties ...


#16

Yep. People that continue to advocate this thing called a free market either just do not get it or are trying to hide the truth from the masses.

There no such thing.

Way up North in FT Macmurray house prices are at an extreme . They can be that high because people make lots of money up there. In no way shape or form do they reflect the input costs of building a home. The same value of materials go into a home there as one in Spuzzum BC where the same house can be had for a fraction of the price .

This has nothing to do with availability of land. The tar sands are up there and they actively destroy land orders of magnitude larger.

house scarcity is deliberate and a partnership between the developers and the politicians to keep it in short supply so as to inflate prices.

The homebuyer than is compromised because having invested close to a million dollars to buy a home s/he has a vested interest in ensuring its so called value maintained and the bankers make way more money off a million dollar mortgage than one for 50000.


#17

Brown's article is right as far as it goes-helicopter $ will increase the ability to resume consumption and do no harm to business as usual, EXCEPT WiseOwl is absolutely right, the soil/air/water/environment can't afford the excess activity such "growth" would engender.

So, inject some direct cash to foil corporate/1% greed & ease people-pain & wage-slavery;
Spend public $ on highly efficient affordable housing, green mass transit/transportation infrastructure, truly renewable energy generation, protection of soil/air/water/environment (peace on earth instead of militarization of societies);
engineer & apply truthful and accurate mass education to avoid replication of past mistakes.


#18

Overt Money Financing is the most effective way to solve the Eurozone
crisis without tearing down the monetary union: .. As growth returns,
structural changes .. . can be implemented

Alternatively, growth is not necessary for structural changes, structural
changes could produce growth.

One such structural change could be the introduction of "fractional
return". Here's the story:

Currently, the private monopoly on the creation of legal tender at
interest, aka the "private banking system", allocates credits beyond
its assets. According to the Bank of International Settlements (Basel
III accords), allocations by big banks can keep increasing until their
assets fall to only 8% of the credit allocated.

Credit allocation beyond assets is called "fractional reserve" and it
is a good idea. Given a wonderful opportunity or a horrible threat, one
can expand the money supply to exploit the opportunity or to respond to
the threat.

However, "fractional reserve" means that month after month, the creditee
pays their hard-earned capital to a so-called creditor who did not in
fact have all the principal in the first place. And, the creditee also
pays interest on that previously non-existent principal.

All of the creditee's payment goes to the so-called creditor. None of
the payment goes to an institution which has enormous costs to enforce
this system.

That institution must educate the public about the system, monitor the
public in case there are people who do not obey, arrest such people and
try them in court, and pay when they are guilty to hold them in jail.

That institution is the government. But under the current system of
"fractional reserve" all credit payments go to the so-called creditor,
none go to pay these costs of government.

In its simplest form, "fractional return" would limit the payment to the
so-called creditor to that fraction of the credit which was actually
backed by creditor assets. There would be zero payment to a creditor
beyond "the skin they actually had in the game."

A more complicated version of fractional reserve could allow some
additional payment as a commission or "finder's fee".

Since creditees do get a benefit beyond the assets committed by the
creditor, they should make the full contracted payments.

But, under "fractional return", payments for credit beyond assets
committed by the creditor would basically go to the government.

Now the government would be in a better financial position to decide
what infrastructure growth to promote, including what government debt
to retire.

To sum up, Overt Money Financing is not the only possible alternative.
"Fractional return" is an alternative that could produce growth.

Your thoughts?


#19

It is time to set capital limits on corporations. Setting that limit is all too easy, too big, too risky, no problem limited liability gone and what that means is shareholders in over sized corporations are liable for the debts of those corporations. A billion dollar cap, go beyond that and any bankruptcy debt comes out of shareholders pocket, their proportion of the debt equal to the proportion of the shares they hold directly or indirectly, up to and including their bankruptcy, any debt left over gets transferred to other share holders, harsh sure.
Either break up and trim down the size of you corporation or face that debt risk, you want to play big man with other people's money, they will now play big risk playing with you. No limited liability for corporations over one billion capitalisation, let them take the full risk for their greed and not push it back onto the rest of society.
Gut wall street and rebuild main street.


#20

I have been researching housing costs in different parts of the US. (If I stay in the U.S. and live to receive a small inheritance I would like to own a home someday - and I want to pay cash and not do a mortgage.) In western Pennsylvania, there are older houses that can be bought for dirt cheap, while the schools in the area are rated as inferior. In another neighborhood, the schools are rated better, with higher property values but the crime rate is the same. I also understand the population migration due to the shutdown of manufacturing, and the foreclosure rate is going back up in that region. Some of the old railroad towns are virtually ghost towns - dirt cheap prices but poor amenities.
I will never be able to afford to own a home of my own if I stay in my home state.
In Atlanta, it appears housing is available, with the population boom. Could be why it is becoming harder to rent an apartment due to income requirements and stricter policies, such as no co-signers for those whose income does not meet them.
The first thing I asked is "where are all these rich people coming from?" Houses near where I grew up starting at $450K. Go into the heart of the city and you still see construction cranes everywhere - a sign of growth. The place always seems to be booming, but a friend who lives there tells me that the job market is getting flooded with "jobs for the youth" - meaning retail and restaurant work. Scratching my head, I ask again, "where are all these rich people coming from?"
Last time I visited my home city, I asked a friend about the pricey new apartments in the area near our old haunt, with rents of around $1800 to start.
"Who can afford to live there?" I asked.
Her answer was to this effect: "People in executive sales, and the like." she said, "They have no morals, they just make their living gouging and fleecing people for all they can get, with no compunction. They're really just prostitutes. Whoring themselves for the salary and lifestyle."
Now, about those empty McMansions? Squatting might save me the exorbitant hotel fees next time I go back to visit my home city!