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I’m Out Of Bullets, How About You?
Perhaps the most critical thing to understand about policymakers' response to the 2008 cri
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Geez, Heis, are you turning in to a gold bug : >
If you don’t read THE BIG SHORT and pass a test on comprehension, you should have your citizenship revoked. Just review Congressional testimony after the 80s S&L crisis and all the other fiascos since the idiot Vietnam campaign and you see it is all human moral hazard.
Amen to that.
Plus it would open up a cheaper alternative path for the hordes who keenly want their citizenship canceled but recoil at the US gov’t currently charging $5000 plus 25% of your global assets for that highly desirable outcome.
Indeed the next recession will likely be met with more extreme monetary tactics and a (monetized) fiscal splurge. Policy makers have already stated they’re not out of ammo. For example extreme NIRP (esp in the coming cashless society), helicopter money, debt jubilee and wealth confiscations for the “greater good”. At least one of Trump’s contenders for Fed chair (Marvin Goodfriend) has already published papers promoting those first two for the Fed toolkit.
Just wanted to add. Good thoughtful article. Now please ponder this… Last crisis, all the Fed efforts did nothing to stem the bleeding. In fact, what halted the slide in March 2009 was forcing the FASB to remove the mark-to-market accounting rule (of course in the counter-factual world of the Fed, it doesn’t see it that way, but truth is fact). So were they already out of ammo last time? And what does that mean for next time?
The whole “out of ammo” thing has always struck me as kind of absurd.
There are lots of things the Fed (or ECB or BOJ) can do to fight a liquidity trap:
-Print a lot of money, say 5% of GDP, and give it to the Treasury as a “special dividend”. Whether Treasury has a tax cut, conducts additional spending, or just stops issuing bonds for while, it stimulates the economy.
-Print a lot of money, and give it to the Treasury as a “tax payment”.
-Print a lot of money, and give it to the Treasury as a “franchise fee”.
-Print a lot of money, and give it to the Treasury as a “seniorage”.
You may see a theme here. None of these things are technically difficult. What is lacking is the political will. Specifically, the (existing) rich people do not want more money to be printed. That is the problem.