why Ben's helicopters are doomed

[grapejelly]

http://www.nakedcapitalism.com/2009/...of-credit.html

Fantastic article.

The sum of it is, money is created via demand. Reserves then are created to meet demand.

The Fed is working on a Friedmanesque assumption that the reverse works -- that increasing bank reserves can then nudge the banks into creating new money.

Steve Keen concludes that Ben is wrong because Friedman was wrong. It is quite an Austrian conclusion. The huge expansion of credit led to the bubble bursting (in 1930s and today) and the result is a rational readjustment of borrowers, not to be confused or stymied by any huge increase in bank reserves.

It totally makes sense to me.

They can print money until they are blue in the face.
They are not going to get a recovery.

[Chomsky]

Re: why Ben's helicopters are doomed

Wasn't this just the gist of EJ's recent article, "Implications of the Policy of Avoidance"?

http://itulip.com/forums/showthread.php?t=7795

Wow, I just felt like metalman.

[Fiat Currency]

Re: why Ben's helicopters are doomed

Thanks for that one grapejelly - I quite enjoyed it.

Perhaps I'll have to change my name to "Credit" Currency

[sunskyfan]

Re: why Ben's helicopters are doomed

Yes. A good analysis. I have been saying all along that the problem is money DESTRUCTION instrinsic to they system seperate from the FED. It is like a virus. Cash could be king for a very long time.

[FRED]

Re: why Ben's helicopters are doomed

Wasn't this just the gist of EJ's recent article, "Implications of the Policy of Avoidance"?

http://itulip.com/forums/showthread.php?t=7795

Wow, I just felt like metalman.

Yes, this is exactly what Implications of the Policy of Avoidance says, but first, which is why you all come here.

[Starving Steve]

Re: why Ben's helicopters are doomed

So far, I am witnessing cash buy more and more and more.

Meat is getting cheaper. Chicken is cheaper. Bread is cheaper. Produce is cheaper and fresher.

Gasoline is cheaper.

Homes are cheaper.

The more the central banksters print, the more prices seem to fall. The stinkers seem to be caught in some kind of trap. (To hell with them.)

This is the most lovely thing I have ever seen in my life. No need to rush to buy anything.

[jiimbergin]

Re: why Ben's helicopters are doomed

Yes, this is exactly what Implications of the Policy of Avoidance says, but first, which is why you all come here.

Fred,
Yes, that is why we come here, but frankly this article is a little easier for some of us ( at least me) to understand.
jim

[junkacc]

Re: why Ben's helicopters are doomed

Thanks GJ, I read that yesterday and like you, found it made sense.

According to that article and a little logic, banks will not lend because:

1. Real interest rates aka the price banks are willing to lend money out in the current eco climate is much higher than what official rates are now. They'd rather sit on that money than risk further losses due to defaults.

2. CDS havent blown up yet. They're positioning to be the last man standing.

[grapejelly]

Re: why Ben's helicopters are doomed

I do however believe that the government borrowing and spending can inflate no matter what...it's part of our Road to Fascism...brought to you by...oh,never mind :eek:

[EJ]

Re: why Ben's helicopters are doomed

I do however believe that the government borrowing and spending can inflate no matter what...it's part of our Road to Fascism...brought to you by...oh,never mind :eek:

That has been our thesis for 10 years, and for 10 years we have been looking for someone to talk us out of it. Keen comes the closest, because he's a trained economist, but not a brainwashed neo-classicist, nor dogmatic Austrian, nor mad cap Keynesian. Still, it all comes down to an underestimation the will of a central bank intellectually and ideologically committed to pressing the zero key as many times as necessary.

[junkacc]

Re: why Ben's helicopters are doomed

All printing will achieve is flush out all savings and pour it into the bottomless pit. That's your future capital down the drain.

*sigh*

[sunskyfan]

Re: why Ben's helicopters are doomed

I don't think anyone would argue that central banks are unwilling to turn the zero key molten with hits. The question is 1 ... has a situatiuon emerged where the more the zero key is hit the more money is contracted or destroyed? or 2 ... is the central bank irrelavant so it doesn't matter how many times the zero key is hit?

I think it is a mixture of the two so that attempts to monetize the debt will fail. The failure will not be due to lack of dollars (they may be infinite ). It will fail because these dollars will be locked up in a boiling radio active soup like the nuclear material still churning in Unit 2 at Three Mile Island or at Chernobyl. I tend to see Ben's Hellicopter more like the Hellicopters of the poor guys at Chernobyl trying to poor concrete on the doomed reactor to prevent further contamination of the countryside.

[FRED]

Re: why Ben's helicopters are doomed

Fred,
Yes, that is why we come here, but frankly this article is a little easier for some of us ( at least me) to understand.
jim

Point taken. Thanks for the feedback.

[Starving Steve]

Re: why Ben's helicopters are doomed

If we would have a few reactors around humming, producing power, we would NOT be in this economic mess now. We wouldn't be wondering about the next injection or helicopter drop of money from the Fed, the Bank of Canada, the Bank of England, the Bank of Mexico, or whomever.

We better understand quite clearly, without any doubt or debate, how we got into this mess, if we are going to find a solution to this downturn.:mad:

10:45AM Pacific Standard Time, 9Feb: "Syncrude charged with duck deaths last year," reads the headline on BNN.........So again, the same issue really: energy development and the eco-frauds causing havoc. The same issue, and it keeps manifesting itself in different ways; but meanwhile, the economy festers.

And the newly elected president in the U.S. wants to spend a trillion dollars on junk--- total junk-- and clearly has no solutions. And Bernanke wants to print. This is the leadership we have, and the world investment community is supposed to lend money for this nonsense?

[grapejelly]

Re: why Ben's helicopters are doomed

I don't think anyone would argue that central banks are unwilling to turn the zero key molten with hits. The question is 1 ... has a situatiuon emerged where the more the zero key is hit the more money is contracted or destroyed? or 2 ... is the central bank irrelavant so it doesn't matter how many times the zero key is hit?

I think it is a mixture of the two so that attempts to monetize the debt will fail. The failure will not be due to lack of dollars (they may be infinite ). It will fail because these dollars will be locked up in a boiling radio active soup like the nuclear material still churning in Unit 2 at Three Mile Island or at Chernobyl. I tend to see Ben's Hellicopter more like the Hellicopters of the poor guys at Chernobyl trying to poor concrete on the doomed reactor to prevent further contamination of the countryside.

point is, it won't fail because governmetn is willing and able to borrow as much as is needed to get the ball rolling. There is a lot of inflation on the horizon but it is delayed maybe a year or two...but then horrific inflation...