Oh la la! Things are heating up. Subjects that used to be confined behind closed doors... discussed only in whispers... and only among rogues and scalawags... are now right out in the open.
Politically, we've got the Obama administration openly "legalizing" the right to kill Americans without first charging them with a crime. It used to be called "murder." Now, according to administration lawyers, it's completely legal!
Asked whether this gave the agency the authority to kill an American citizen on American soil without any due process of law, the CIA's new director wouldn't say. He mumbled.
Sen. Rand Paul threatened to block the nomination if he doesn't get a straight answer. But what difference will an answer, straight or crooked, make? The feds are out of control... and there isn't anyone with the will or the power to bring them to heel.
Financially, the feds and the Fed are out of control too. And not just in the U.S. Central bankers all over the world are loading their drones with cash.
And now we've got the world's leading opinion mongers openly advocating things that used to be a joke... or a crime.
Last week, Adair Turner, head of Britain's Financial Services Authority (equivalent to the SEC in the U.S.) came out in favor of "helicopter money." CentralBanking.com has the story:
"Overt monetary financing'" -- printing money to pay the government's bills -- should not be considered a taboo subject, and in many cases is a viable stimulus option, according to Adair Turner, the chairman of the UK's Financial Services Authority (FSA).
Speaking last night at the Cass Business School in London, Turner -- who was a candidate to succeed Mervyn King as governor of the Bank of England, before the appointment of Mark Carney -- focused on the controversial topic of "helicopter money," a term coined by economist Milton Friedman, who once suggested governments could fight deflation by scattering newly printed notes out of helicopters.
While Turner was careful to hedge his remarks with considerations of the various risks surrounding monetary financing, he came down clearly in its support. "I think there are some circumstances -- they may be extreme circumstances -- where you should use helicopter money," he said.
Then, yesterday, Martin Wolf -- the lead economist at the Financial Times, and one of the "100 Most Influential" people on the planet -- weighed in heavily:
First, it is impossible to justify the conventional view that fiat money should operate almost exclusively via today's system of private borrowing and lending. Why should state-created currency be predominantly employed to back the money created by banks as a byproduct of often irresponsible lending?
Why is it good to support the leveraging of private property but not the supplyof public infrastructure? I fail to see any moral force to the idea that fiat money should only promote private, not public, spending.
Second, in the present exceptional circumstances, when expanding private credit and spending is so hard, if not downright dangerous, the case for using the state's power to create credit and money in support of public spending is strong.
The quantity of extra central bank money required would surely be smaller than under today's scattergun quantitative easing. Why not employ monetary financing to recapitalize commercial banks, build infrastructure or cut taxes? The case for letting fiscal deficits facilitate private deleveraging, without undue expansion in overt public debt, is surely also strong.
Cancer sufferers have to undergo dangerous treatments. Yet the result can still be a cure. As Lord Turner [chairman of the Financial Services Authority] notes, "Japan should have done some outright monetary financing over the last 20 years, and if it had done so would now have a higher nominal gross domestic product, some combination of a higher price level and a higher real output level, and a lower debt to gross domestic product ratio."
The conventional policy turned out to be dangerous. Whether this is also true of troubled countries today can be debated. But the view that it is never right to respond to a financial crisis with monetary financing of a consciously expanded fiscal deficit -- helicopter money, in brief -- is wrong. It simply has to be in the tool kit.
So the banks won't lend? People won't borrow? Consumer demand doesn't increase? Jobs aren't created? No worries -- we'll take out the drones... load them with cash and drop it all over the world. Spend, spend, spend until the economic problem goes away.
Is this a dangerous treatment? Yes, of course. But "cancer sufferers have to undergo dangerous treatments," says Wolf, so why not an entire economy?
And think of the benefits. Money goes directly to worthwhile projects... and into consumer pockets. People get jobs. Things get done. Bridges get built. And the federal deficits disappear. The feds don't borrow from the Fed. They just spend the money.
Dear readers will recognize this as the policy of Mr. Gideon Gono of the Central Bank of Zimbabwe. They will also recall that it was disastrous. But Wolf must imagine that he and the other elite policymakers and policy implementers are much smarter and more disciplined than Gono.
Gono's money drones took off from Harare and headed directly for the army barracks. Then, when inflation was getting out of control, his monetary policy was out of his control too. He couldn't stop paying the army!
How will it be any different in London or Washington? Mr. Wolf doesn't say.
Public discussion of helicopter money has been taboo among economic officials. The one exception was a speech by Ben Bernanke in 2002, before he became Fed chairman. This speech offered the most detailed and eloquent justification of monetary financing prior to Turner's, and it earned Bernanke the Wall Street nickname "Helicopter Ben." Since then, however, helicopter money has never been seriously mentioned by any senior official in any advanced economy. Until this week.
Ten years after the Helicopter Ben speech, Turner has broken the taboo about monetary financing. The effect on economic debate around the world could be irreversible and profound. Turner's 70-page paper presents the arguments for the many variants of helicopter money with unprecedented academic sophistication, financial detail and historical context.
Now that Turner has broken the taboo on helicopter money, the sound of monetary salvation should soon be heard round the world.
Our guess is that the helicopter money will come. So will the drones. Serious money policies and decent people... will both get blown up.
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