Forget COVID-19 – The U.S. Treasury Secretary Indirectly Acknowledged We’re Fighting a Global Depression
What the Treasury Secretary didn’t widely advertise is how those new dollars will be created and why.
It’s Not Debt, It’s New Money
We’re Not Providing Financial Aid to Americans, We’re Fighting An Economic Depression
“Let us suppose now that one day a helicopter flies over this community and drops an additional $1,000 in bills from the sky, which is, of course, hastily collected by members of the community. Let us suppose further that everyone is convinced that this is a unique event which will never be repeated.” (Milton Friedman, “The Optimum Quantity of Money,” 1969)“The deflation speech saddled me with the nickname ‘Helicopter Ben.’ In a discussion of hypothetical possibilities for combating deflation I mentioned an extreme tactic—a broad-based tax cut combined with money creation by the central bank to finance the cut. Milton Friedman had dubbed the approach a ‘helicopter drop’ of money. Dave Skidmore, the media relations officer…had advised me to delete the helicopter-drop metaphor…’It’s just not the sort of thing a central banker says,’ he told me. I replied, ‘Everybody knows Milton Friedman said it.’ As it turned out, many Wall Street bond traders had apparently not delved deeply into Milton’s oeuvre.” (Ben Bernanke, The Courage to Act, 2015, p. 64)
This Isn’t About Politics; This is About Saving The U.S. Economy from Obliteration
Republicans and Democrats alike should understand that sending Americans cash is not a political issue. Yes, the additional $2,000+ in Americans’ bank accounts will provide a partial means for paying bills and buying necessities, but the primary purpose is to prevent the entire economy from grinding to a halt and exacerbating the economic crisis.
“It’s not tax money, it’s new money. If you refuse to take it and spend it, you’re part of the problem, not the solution.”
When you say, “I don’t want my kids relying on the government,” “Illegal aliens better not get checks,” or “I don’t want my check; I’m sending it back” you are unwittingly advocating for your own financial destruction and the total obliteration of the United States economy. More directly put, you’re saying, “Great Depression 2.0? Bring it on! Sounds bitchin’!”
Forget citizenship and the issue of illegal immigration. Those are arguments for a period of economic prosperity. Whether or not your political mind is willing to accept this harsh truth or not, the reality is that we need as many dollars chasing goods and services in the U.S. economy as possible.
It doesn’t matter WHO spends these new dollars as long as they’re spent, and QUICKLY. If you don’t want to accept your check out of “principle,” cash it and give it to someone else. It’s not tax money, it’s new money. If you refuse to take it and spend it, you’re part of the problem, not the solution.
The economic battle we are battling now is far worse than the 2008 financial crisis. Indeed, this could become the greatest financial disaster of our lifetime and the longer we wait, the more we argue about politics, the greater the likelihood we will experience a repeat of the 1930s.
The difference between a devastating recession in 2008 versus total financial obliteration was mere days. We don’t have time for Washington lawmakers to play politics and battle it out for a week. We have a few days at most to act.
This Is More Than Financial Support for Struggling Americans, It’s The Monetary Tool of Last Resort
The Federal Reserve has already exhausted the traditional and non-conventional monetary tools of the past. Rates are at all-time lows and the announcement of additional rounds of Quantitative Easing has failed to create a floor in financial markets.
As I write this today, the Dow Jones has lost more than a third of its value since its peak and is headed for a sub-20,000 close. Rallies have been short-lived and each “recovery” will become increasingly less dramatic. In the crudest terms possible, the Federal Reserve has already shot its wad and failed to stem the economic crisis.
Again, flooding the economy with money that didn’t exist a week ago is a means of immediately creating a scenario in which we have more dollars chasing the same amount of goods and services.
NO, It Will NOT Increase The National Debt
Former Federal Reserve Chairman Ben Bernanke explained the theory of helicopter money and why it will NOT increase the national debt in April of 2016 in an op-ed for the Brookings Institute:
“However, in recent years, legislatures in advanced industrial economies have for the most part been reluctant to use fiscal tools, in many cases because of concerns that government debt is already too high. In this context, Milton Friedman’s idea of money-financed (as opposed to debt-financed) tax cuts—“helicopter money”—has received a flurry of attention, with influential advocates including Adair Turner, Willem Buiter, and Jordi Gali.”
“To be clear, the probability of so-called helicopter money being used in the United States in the foreseeable future seems extremely low. The U.S. economy has continued to strengthen and is not today suffering from the severe underutilization of resources and very low inflation (or even deflation) that would justify such an approach; and, as I’ve noted, the Fed has other tools still available. Nevertheless, it’s important that markets and the public appreciate that, should worst-case recession or deflation scenarios occur, governments do have tools to respond.”
The worst-case scenario is here, America.