Social Engineers Pleading for Helicopter money
Apparently the mainstream government propaganda organs are on a mission to spread the worst economic ideas possible, so as to bring down what little is left of the free market economy even faster. Recently they are employing an ages old trick: promise people they will get something for “free”.
The latest author to take up the baton is one aptly named Vincent Crook at Bloomberg (anyone who has followed the Bloomberg editorial line in recent years should by now be aware that it is an even worse socialistic and statist rag than the Financial Times. The latter at least allows opposing voices to have an occasional say).
Mr. Crook has graced us with a screed entitled: “ECB Should Fire Up Its Helicopters”.
The ECB's magical money helicopter
Image via adamsmith.org / Author unknown
The ideas presented in this article are nothing new. Faced with the failure of the post 2008 money printing orgy to bring about any lasting economic improvement thus far – instead, only even bigger, arguably more dangerous asset bubbles have been blown – various economists have proposed that central banks should print yet more money, but instead of buying securities from troubled banks, they should simply send everyone a check (the aforementioned “for free” carrot, a.k.a. “helicopter money”). This is usually accompanied by an appeal to authority in the form of the late Milton Friedman who coined the term. Leave it to our modern-day social engineers to dig up the man's very worst ideas and declare them holy writ.
We already discussed in some detail why the idea is appalling economic nonsense and would be extremely dangerous for Europe's economy if it were actually implemented (see “A Flawed Analysis of What Ails the Economy” for details). Below are a few excerpts from Mr. Crook's article with our comments interspersed. He starts out with the usual nonsensical pablum about the alleged “danger of deflation”:
“Last week, a senior ECB official said the central bank will wait until the beginning of next year before deciding whether to start buying government debt — that is, adopt quantitative easing in the style of the U.S. Federal Reserve. The ECB apparently still hopes that the small-bore measures it's announced so far (purchases of private bonds and asset-backed securities) will deliver enough stimulus. That's doubtful at best. Deflation in the euro area is a clear and present danger. More aggressive QE is needed, the sooner the better.
As we never tire to point out, deflation – which in the nowadays most widely used definition refers to falling prices of consumer goods – is not a “danger”. Falling consumer goods prices are in fact the very hallmark of a progressing economy. Increasing productivity lowers production costs and this is passed on to consumers. In “No, Deflation is Not a Danger”, we already discussed similar assertions about this imaginary danger made by ECB president Mario Draghi.
If you read Mr. Crook's article, you will notice that he is not stopping to ponder whether his assertions about the “deflation danger” or the proposed cure, namely even more money printing, might require justification. We have noticed this frequently in mainstream articles on these and related subjects (such as “fiscal stimulus”): it is glibly assumed that it should be obvious to readers that assorted central planning mandarins and their apologists actually know what they are doing and saying.
The idea that money printing is “beneficial” evidently isn't even up for debate anymore. Mr. Crook informs us that the ECB faces numerous obstacles in implementing various money printing plans – inter alia the not inconsiderable one that certain types of “QE” are simply illegal according to the central bank's statutes. To this it should be noted that the part of the ECB's statutes regulating the question of government financing by the central bank is slightly ambiguous. It reads as follows:
21.1. In accordance with Article 123 of the Treaty on the Functioning of the European Union, overdrafts or any other type of credit facility with the ECB or with the national central banks in favor of Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the ECB or national central banks of debt instruments.”
