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World’s Savior: “Helicopter Money”?

11 Feb

Helicopter Money: Modern Manna? [courtesy Google Images]

Helicopter Money: Modern Manna?
[courtesy Google Images]

We live in times that are not merely “interesting” but spectacularly so.

According to Zero Hedge.com (“Helicopter Money Arrives: Switzerland To Hand Out $2500 Monthly To All Citizens”),

 

Citi Bank’s chief economist has recently proclaimed that, ‘only helicopter money can save the world now’.

The Finns are considering a ‘basic monthly income’ for the entire population.

“And soon, Swiss residents are to vote on a countrywide referendum about a radical plan to pay every single adult a guaranteed income of around $2500 per month, with authorities insisting that people will still want to find a job. . . .  Under the proposed initiative . . . each child would also receive 625 francs ($750) a month.”

 

 

•  First, by “Helicopter Money,” they mean Quantitative Easing (QE) currency that’s dispersed directly to the people rather than to “too-big-to-fail” banks.

So far, every attempt at QE by Japan, the EU and the US has failed.  But, if QE can work under any circumstances, giving “Helicopter Money” directly to the people might be the way.  Still, that “Helicopter Money” must ultimately come from some entity that is productive.  The central banks can’t simply spin currency out of thin air forever.  They must ultimately spin it out of hot sweat.  Somebody, or some thing, must actually work to produce something.

 

•  Second, it’s probably more accurate to say that “some” or even “most” Swiss residents “will still want a job” after they start receiving “free” (no work or productivity required) “helicopter money”.

Insofar as $2500/adult basically matches the Swiss poverty line and the people below that line already get by without working, what are the odds that people who already survive without jobs will choose to get jobs if they receive a free $2,500/month?  It’s possible that many of those who are already living in poverty do so because they don’t want a job or lack the necessary attributes to get and hold a job.  It seems unlikely that, if the Swiss government gives them each $2,500/month, that they’ll change their minds about getting jobs.  Poverty will simply become a more attractive choice.

Implication:  a “free” $2,500 a month is unlikely to make more people take jobs.

 

•  Third, what about the people who are working and living just above the poverty line?  If you had a job making $3,000 a month and the government guaranteed you $2,500 without having to work, get up early in the morning, pay for gasoline to get you to work, etc., would you quit your job?  A lot of people would answer Yes.

Implication: a “free” $2,500/month will increase the number of unemployed.

 

•  Fourth, where’s the $2,500 coming from? One way or another, the Swiss government will have to extract an average of at least $2,500/month out of Switzerland’s total adult population in order to have the $2,500 it promises to provide to every adult.

Implication:  “Helicopter Money” will provide the Swiss economy with no net gain.  Given that government will charge something for handling all that “money,” “Helicopter Money” will actually create a net loss for the economy.

 

•  Fifth, the idea of handing out a free $2,500/month to everyone is irrational, even comical. In the end, this Helicopter Money scheme is merely an income redistribution program that will rob the productive and give it to the poor, those who choose not to work, and/or those who are inherently non-productive.

 

Economic Crack

Perhaps government economists promoting this “Helicopter Money” idea think they’re magicians who can not only spin paper currency out of thin air, but can also “spin” public approval and support out of thin air.  Like a pantheon of mythical Greek gods, economists seem to believe they can make economic reality in any form they please by simply speaking it into existence.

These government economists actually believe that they can pay people enough to live on without working/producing, and everyone will keep on working.  They’re crazy.

Q:  What’s the source of all this insanity? What’s the economists’ drug of choice?

A:  Fiat currency; the idea that we can treat debt as if it were wealth and an asset.  That fundamental idea is irrational.  It’s insane.  But it’s addictive.  It’s economic crack.

Once you accept the mad premise that debt is our highest form of wealth, you’ll be led to conclusions that are increasingly irrational—like negative interest rates and paying some people to “shop ‘til they drop” while paying others (like farmers and welfare recipients) to not produce anything.

“Helicopter Money” means that there’ll be more currency chasing fewer goods and services.  Inevitably, paying people not to produce will cause serious inflation, even hyperinflation.  Prices will rise.   When they rise high enough, they’ll destroy the currency and perhaps collapse the economy.

When the debt-based monetary system collapses, all of the existing debt will be cancelled—but so will virtually all of our paper capital.  Where will we find the capital needed to build a new factory or shopping center and, more importantly, to lend to farmers so they can purchase seed to plant to grow next year’s crop to feed the big cities’ residents?

Without any recognizable “capital,” there’ll be chaos and people will die—in America, at least hundreds of thousands.  Globally, maybe millions.  Why?  Because the whole world is addicted to fiat dollars.  Take those dollars away and the world’s addicts will go into shock.

 

The Economists in the Rubber Room who are gods

Fortunately, the economists do not yet actually rule the world—they only think they do.  Even though the average voter doesn’t have a PhD., he can still sense when the economists are pontificating under the influence of too many hits of economic crack.  (“Martha—the damn economists be trippin’ out, again!”)

But get this:

 

“The initiative’s backers say it aims to break the link between employment and income, with people entitled to guaranteed income regardless of whether they work.”

 

“Break the link between employment and income”?!

What they’re really proposing is to break the link between productivity and income.

How revolutionary is that?

There’s been a link between productivity and income since Adam and Eve were bounced out of Eden.  If you want to eat and survive, somebody’s got to work.  Somebody’s got to produce something.  Therefore, breaking the link between productivity and income seems irrational, fantastic and contrary to millennia of human history.

 

The Robots are Coming!  The Robots are Coming!

Still, as much as I hate to say it, in an age of increasing automation and robots, the seemingly insane idea of breaking the link between productivity and income makes some sense.  Robots have already replaced millions of workers around the world. Productivity is being achieved with little or no human labor.  The link between employment and income is not yet being broken, but the need to employ others in order to produce things is being eliminated.  Result so far?  People who formerly derived their income from their employment are now unemployed and without income.  For such people, we have too choices:  feed them without regard to their employment, or let them starve to death.

Six months ago, I saw a report that China’s principle industrial province planned to replace all workers with robots within five years.  Thus, robots are cheaper to own and operate than Chinese workers.  If cheap Chinese labor can be replaced by robots, I guarantee that highly-priced American workers can and will also be replaced.

Just last week, I saw a report that claimed that robots working in a huge, American warehouse were 800% more productive than the warehouse workers they replaced.  There’s no way that any business can resist the promise of an 800% increase in employee productivity.  If a businessman won’t install robots and his competitors do, he’ll be non-competitive, bankrupt and run out of business.

The financial logic behind employing robots is irresistible.  Robots will replace most of the world’s laborers—maybe, most of the middle class—perhaps even much of the upper middle class.

But, what’ll we do with all the people who are replaced by robots and become unemployed?  Let them die?  Kill them?  Neuter them?  Or sustain their lives with welfare, entitlements, subsidies and “Helicopter Money”—and just let ‘em breed like rabbits and put more and more strain on Earth’s limited resources?

The big question is:  If we don’t need people to work and produce things, why do need them at all?  To wage needless wars?  To dance in topless bars?

 

Public Warnings

Those aren’t questions for the distant future.  Some people are already facing such dilemmas.

Most people reading this article have heard of the Georgia Guidestones.  Whoever erected those monoliths is unknown to the public.  However, among other things, those Guidestones have declared since A.D. 1990 that the earth’s population must be reduced to 500 million people.  That means that some person or institution is already planning to “eliminate” about 93% of the world’s current population.

I’m not saying that the Georgia Guidestones are anything more than a curiosity.

I’m not saying that 93% of us are due to be “eliminated”.

I am saying that, thanks to the growing multitude of robots, it may be wicked to consider eliminating 93% of the world’s population, but it’s not completely irrational. It’s doable.  And we’re being warned by the Georgia Guidestones that plans to eliminate most of us are being considered, perhaps even implemented.

It may well be that 93% of us could be eliminated and replaced by robots that served . . . who?  The richest and most intelligent 7%?  The Illuminati?  The Jews?  The Jesuits?  The Neo-conservatives?  The Cummunists?  Pick your favorite conspiracy-theory villain.

Given the growing numbers of robots, 93% of us could soon be non-productive and therefore expendable.  Given the growing numbers of robots, a lot of those conspiracy theories about population reduction become rational and possible.  Don’t worry about being temporarily replaced by an illegal alien.  Worry about being permanently replaced by a robot.

The real villains here are profit and loss statements, fast-moving technology, economic competition and mathematics.

 

What to Do, What to Do?

So far, the number of American robots hasn’t grown high enough to overtly raise unemployment rates.

So far, thanks to its ability to borrow funds and go deeper into debt, our government has been able to avoid facing the permanent unemployment dilemma head on.  We give welfare to people or can’t or won’t work and avoid facing the reality that, increasingly, there’s no job they can do.

We talk about retraining the unemployed for new jobs in our high-tech world.  But the truth is that many, perhaps most of the unemployed lack the intelligence, education and/or work ethic to learn anything that would make them as productive as robots.  Most can’t be “retrained”.  Most are not simply unemployed.  They are unemployable.

Therefore, rather than “eliminate” them, governments are choosing to implement “Helicopter Money” programs to subsidize the unemployed and unemployable.

But there’s a problem.  There are so many unemployed/unemployable that government can’t raise enough taxes to provide the Helicopter Money needed to subsidize the non-productive.  Therefore, government has to borrow the currency needed keep providing Helicopter Money to the unemployed.

But the day is coming when government won’t be able to borrow enough additional currency to fully subsidize the non-productive poor on welfare, the non-productive rich on subsidies, and the non-productive government retirees on pensions. When that day arrives, we’ll have to choose between:

 

1)  Taking so much money from people who are still productive and/or from robotized corporations to support the non-workers, that the productive give up working (as they did in Ayn Rand’s Atlas Shrugged); and,

2)  Killing the non-productive or at least allowing them to starve and/or kill themselves (as is already seen in the “hood”).

 

Within the next few years, the world’s central question will be What are we going to do with the billions of people on this planet who can’t produce enough to feed themselves?

What, indeed?

 

A Crazy Idea Whose Time Has Come

According to the ZeroHedge article on “Helicopter Money”:

 

“Support is growing around the world for such spending to be funded by ‘People’s QE.’   The idea behind ‘People’s QE’ is that central banks would directly fund government spending . . . and even inject money directly into household bank accounts, if need be. And the idea is catching on . . . . and it won’t be unpopular. Who will protest when the feds start handing our money to ‘mid- and low-income households.’”?

OK, OK.  Lemme see if I’ve got this right. . . .  First, central banks will fund the government . . .  Second, the government will fund non-productive people . . . but, third, who will fund the central banks?  The world can’t go on just spinning currency out of thin air, can it?  Somebody’s got to actually work hard enough to produce enough to support themselves—and all the other people who don’t work or produce anything but babies.

Whoever that “someone” might be, he probably won’t be you and me.  Could that “someone” be the robots?

 

“Rather than buying assets, central banks will  . . . credit our bank accounts!  Indeed, ‘helicopter money’ can be seen as permanent QE, where the central bank commits to making the increase in the monetary base permanent.”

 Oops.  My mistake.  Apparently, the central banks don’t plan to employ robots but do plan to simply “spin” the cash out of thin air.  Forever.

But if economists can simply “spin” currency to feed the non-productive, won’t the resulting, on-going increases in the monetary supply be just as hyper-inflationary as what we saw for 16 years in Zimbabwe?

 

Monetizing = Spinning

ZeroHedge:

 

“The monetizing of state debt by the central bank is the engine of helicopter money.  When the central state issues $1 trillion in bonds and drops the money into household bank accounts, the central bank buys the new bonds and promptly buries them in the bank’s balance sheet as an asset.”

 

Translated into English, the phrase “monetizing the state debt” means “spinning currency out of thin air”.

Why “thin air”?  (Actually, it would be more accurate to say “spinning currency out of the government’s and/or the Fed’s imagination.”)  But both metaphors—”thin air” and “imagination”—imply the idea that the government’s currency is created out of nothing and exists only as a seductive illusion.)

Why “thin air”/“imagination”?

Because government is non-productive.  Government produces nothing tangible and therefore has nothing of its own with which to redeem its proposed “Helicopter Money”.  It’s like giving $1 million to a man living alone on a desert island.  What good is having all that cash in a world where no one else produces anything?  Without production, what good is cash?

 

Doom Through Debt

Ultimately, QE and “Helicopter Money” are based on a government’s ability to borrow and go deeper into debt.  However, when the productive creditors are all bankrupted by QE, ZIRP, NIRP and government regulations—who will government then borrow from (and/or rob) to support the non-productive?

Nobody.

When most of the producers and/or creditors have been wiped out, the fiat monetary scheme must fail.

Ohh, there might still be a few bank accounts that could be looted, but after we lose our creditors and producers, the whole parasitical fiat monetary system will collapse.

It’s already happening.  Personal savings rates are miniscule. Government can’t borrow from the American people because about half of them don’t have enough savings to cope with a $500 emergency.

Why are Americans broke?  Because, in the past, the depositors/creditors were largely producers.  As government regulations, higher taxes, bigger government, shipping industries and jobs to third-world nations, inviting illegal aliens to enter the U.S.–and now robots–have diminished the number of American producers, it’s also wiped out savings for most people.  Bank accounts and funds available for lending have withered.  American creditors have been disappearing for years.

An increasingly impoverished, unemployed, and unemployable people can’t be taxed to support government largesse.  Government has been forced to borrow much of its currency from the Federal Reserve because the Fed doesn’t have to be productive so long as it can still “spin” currency out of thin air.

The Fed’s ability to essentially “spin” currency makes it the “lender of last resort”.  Why?  At least part of the reason is because there are no longer enough actual, producers/creditors who are able and willing to lend the billions government needs to subsidize the non-productive.

 

•  All by itself, QE is evidence that our productive creditors are broke and disappearing.  If we had a free market and the banks were in danger, private sector creditors would’ve invested in many of the troubled banks.  It’s because the productive, private-sector creditors are disappearing that government is forced to “borrow” from the non-productive Fed in order to have enough funds to subsidize the growing ranks of non-productive and unemployable.

How long this necessity/insanity can continue is anyone’s guess.  It can’t continue indefinitely.  Sooner or later, government will be forced to stop subsidizing the non-productive.

Government probably won’t stop all at once.  They’ll cut a little here and a little there until the non-productive finally riot and rampage.

When that happens, many of the non-productive will die from starvation or violence.  Even the productive will be in peril.  The madness of debt-based currency, robots and “Helicopter Money” has put us on the road to chaos.

Yes, the robots may be able to feed us.  But, inevitably, someone is going to ask Why should they?

That’s when the conversation will get really “interesting”.

 

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One response to “World’s Savior: “Helicopter Money”?

  1. Lyndon

    February 12, 2016 at 4:46 PM

    Obviously inflationary but puts liquidity in the real economy whereas QE mostly put money into debt write offs and speculation. Was done in Austria during the 1930s with success because not done for too long.

     

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