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Economists like Bernanke have talked about dropping money from helicopters in the sky, in order to prevent deflation. What the government has done in the last

• jdhn 5y ago
  I could go for some deflation in the housing market right about now.
  • dominotw 5y ago
    same here. Interest rates are going up so there is some hope.
  • ping_pong 5y ago
    The Fed will do WHATEVER it takes to prevent house price deflation. They've already shown this during the Financial Crisis. Too much of the economy and financial system is based on house prices, there's no way that they can ever afford to see house prices decline in our lifetime.
    • lotsofpulp 5y ago
      They will do whatever it takes to prevent asset price deflation in general. The last thing politicians want is people watching their 401k values go down, and they certainly want them to go up. As far as I’m concerned, VTI is a better inflation protected security than TIPS for any 3+ year investment horizon.
    • jdhn 5y ago
      At this point I'll take stagnating housing prices.
  • sjg007 5y ago
    You can still buy a cheap fixer upper in Detroit.
    • jdhn 5y ago
      Funny you say that, I live near Detroit. I'd argue that the cheap fixer upper is seeing price inflation as well.
• giantg2 5y ago
  "The fact that everyone keeps talking about more stimulus means that the government knows more than we do" Like what?
  • mywittyname 5y ago
    The US government collects data about production capabilities of pretty much every industry in America. Major companies do talk frequently with government officials about potential problems and roadblocks the business are facing, especially internationally. In addition, they have an enormous spy apparatus operating in probably every country on earth. Military satellites can be used to gauge production around the world. They can monitor metal mines in Australia, track the shipments of ore to refineries, and have a good idea of where the finished products are going. Clearly, all of this information is gathered and analyzed by different departments, but analysts within the White House can obtain an absurd amount of detailed information of almost any nature.
    • giantg2 5y ago
      So what would they know that we don't? Hedge fund and industry analysts also pay a lot of attention to domestic and international production. Even stuff like public company shareholders meetings have a lot of insight. The issue I would be more concerned with is the overall structure of the economy. For example, only 15% of money lending goes to actual production use. The other 85% is just a house of cards that is lending to be lent again, or invested in nonproductive ways. Basically moneylending inception.
      • mywittyname 5y ago
        The most obvious example would be military-related. The government would know a lot more than the private sector about troop movement, ordinance production, deployment of assets (fighter jets, naval fleets), sabotage plans. Pretty much anything that is being intentionally hidden from public view by other parties is potentially known about by the government. Even things like water levels of various bodies around the world are data points the military tracks (food shortages lead to strife) but aren't really easy for civilians to get.
• lumost 5y ago
  As a thought experiment. In an economy where money fell in bags from helicopters from the sky, wouldn't you expect net makers and street sweeping trucks to experience drastic growth?
• uncoder0 5y ago
  I've always wondered why the government when doing these ~10 trillion stimulus to various industries just didn't give every person ~$30,000 during the last year spread out over the year. Probably because that would drive actual inflation.
  • lotsofpulp 5y ago
    Because the government does not want to upset the social ordering of people. So much of our lifestyle derives from the fact that those at the bottom have no choice but to work for those low wages and poor quality of life at work. Giving them an option upends all the assumptions that go into loans, and therefore having to raise wages would cause defaults for businesses, and otherwise wreak havoc for those who currently benefit from owning those assets and debt. A slow increase in quality of life for those at the bottom is okay, but a large increase so that they jump up a few rungs on the ladder would cause pain for those above.
    • new_realist 5y ago
      Inflating the money supply wouldn't do what you describe. It would just make everything more expensive.
      • otnihoithiu 5y ago
        If you gave every American 30k USD, most people would go out and purchase a 50k automobile.
      • lotsofpulp 5y ago
        Giving everyone $30k would. Just the extra $300 per week that people were getting is causing them to be dissuaded from subjecting themselves to the bottom tier of jobs. I’ve spoken to a lot of hotel owners and restaurateurs lamenting their inability to hire people for low wages part time work. And there are fast food restaurants around me that are closed at many times because they have no workers, especially for late night hours that they used to. Some hotel owners I know are closing off portions of their inventory because they cannot find housekeeping staff to clean their rooms for the wages/quality of life/stability they want to provide. That is also the reason for all the PPP nonsense. Rather than simply paying the workers for lost wages and paying the businesses for lost revenue, PPP stipulations make it so the worker stays tied to the business.
• newaccount2021 5y ago
  The government stands more to lose by a rate hike than any other individual entity. Ten year notes are traded in an open market, and sold at auction - Treasury can't just set a price and expect people to pay. If the prevailing ten year rate reverted back to the historical average of 4.9%, 30% of the Federal budget would have to be dedicated to just servicing the interest on the debt. For Uncle Sam, low rates are about survival. We're in deep caca.
  • ping_pong 5y ago
    > Treasury can't just set a price and expect people to pay The Federal Reserve is the largest purchaser of UST, so effectively yes, they can. As long as QE is happening, and as long as the rest of the world doesn't stop calling USTs "risk-free assets", it won't ever stop. If somehow the US loses its grip on that status, though, all bets are off.
    • machinebun 5y ago
      It basically happened in the 1970s: https://en.wikipedia.org/wiki/Carter_bonds https://en.wikipedia.org/wiki/Carter_bonds
  • candiodari 5y ago
    I don't get that reasoning. Obviously the Fed will prevent any such loop from happening, and it won't be the least bit controversial. They have many options to do this. For example, the Fed can in fact print money and buy treasuries (which they already did). They can (and do) pay the "profit" on Treasury bonds to the government, which they could accelerate to immediately, then buy a boatload. Or they can change reserve requirements on banks. Or ... Whatever you think is going to bankrupt the US government, it's not going to be treasuries. It's just not.
• thrwawy12345 5y ago
  > Which means we must have narrowly averted a truly horrific situation as a country. Citation needed. I don't understand the logic here.
  • carlmr 5y ago
    Not OP. I think the idea is that we dumped so much money into the economy and had so little inflation now, that not dropping the money would have meant severe deflation.
  • AnimalMuppet 5y ago
    Adding $10 Trillion should have created a great deal of inflation - much more than we see. Therefore, if it were not added, we probably would see much worse than no inflation - we would see significant deflation. That's far more ruinous than mild inflation is.
    • tediousdemise 5y ago
      Inflation is so low right now because the Fed is artificially forcing low interest rates. Dollars in circulation has little impact on it.
      • machinebun 5y ago
        > Inflation is so low right now because the Fed is artificially forcing low interest rates. Dollars in circulation has little impact on it. Inflation in the short term has more to do with elasticity of supply than demand (unless demand spikes hugely). Low interest rates don't have much to do with it (low rates are usually a tool to stimulate demand, but they only work when you don't have a pre-existing debt bubble that must be deleveraged).
    • thrwawy12345 5y ago
      Why is deflation worse than inflation? I like it when the things that I buy get cheaper.
• anonporridge 5y ago
  You must have been getting a very different information stream than me. People have been decrying (or praising) the helicopter money of the past year+ since before it even started. Hell, there was even a moment in March/April of last year when people were speculating that Trump might even implement a form of UBI.
• thatfrenchguy 5y ago
  And clearly we're seeing this not causing massive inflation, given the inflation is <5% everywhere over the last decade.
  • otnihoithiu 5y ago
    Housing, schooling, and healthcare are necessities that people will go deeply into debt to be able to afford. They will pull money out of their retirement to bid on houses or pay for their kids college. They will mortgage anything, and beg from friends and family, to afford healthcare. These three items are well known to have costs that have risen above inflation for decades. I offer an alternative explanation: these three items are so vital to people that they will sacrifice spending in other areas to support these costs. All of the unmeasured inflation of the past decades is represented solely in these items.
  • ping_pong 5y ago
    We have seen massive inflation in asset prices. Just look at housing and the stock market, both of which took off after the Financial Crisis. This is the primary cause of the massive income inequality we see these days, because poor people can't afford houses and stocks but upper middle class and wealthy people can and do.
• otnihoithiu 5y ago
  Another thing people complain about is the wealth gap. Inflation increases the value of assets. Wealthy people own assets and poor people consume goods to survive. As a result, inflation increases the gap between the wealthy and the poor. The only realistic way to reduce the wealth gap is to accept deflationary periods. This would also improve the savings rate and reduce debt. I understand that modern theories believe deflation to be the end of days. I attribute that belief to the fact that a deflationary period was observed during the great depression, and has been believed to be a cause rather than an effect. I frankly disagree with that viewpoint. I believe that the government has a vested interest in ensuring inflation because the government is a debtor. A protracted period of deflation would bankrupt the government. People cite the post-war period as one of a smaller wealth gap, but the primary reason for that is that there had been a ten year period of deflation just proceeding it.
• imtringued 5y ago
  >What the government has done in the last year with its $10+ trillion in stimulus, is the exact definition of dropping money from helicopters and yet no one is pointing this out. Well, kinda. It's like you're only flying the helicopters over company headquarters and LA's suburbs and nowhere else. The stimulus checks and increased unemployment can be considered helicopter money from a practical perspective though because it reached everyone. It would be even better to spend it on infrastructure or building housing but you have to do something...