Helicopter Recall – Fiscal Repairs Needed

“Helicopter money” (HM) is a term invented by Milton Friedman to refer to the fantasy of a monetary authority (central bank) distributing money – ex nihilo, in the absence of any related asset acquisition – as a way of stimulating aggregate demand. It’s an idea that’s permeated the blogosphere in recent months, in the wakeRead More

The Unpleasant Fiscal Arithmetic of Eurozone QE with Risk of Sovereign Defaults

Paul De Grauwe has written about potential fiscal effects from an anticipated ECB quantitative easing (QE) program: http://voxeu.org/article/quantitative-easing-eurozone-its-possible-without-fiscal-transfers The analysis is excellent to a point, but doesn’t go far enough. In fact, there are problems with the methodology and the conclusion. The subject involves complex aspects of Eurozone monetary policy – multiple sovereigns, the prospectRead More

Monetarism

This is rather impressive: “Cash still exists in rather surprising quantity – about a trillion dollars, or more than $3,000 per capita, 77% of it in hundred-dollar bills. But you and I, corporate businesses, and financial markets use trivial amounts of cash. The legal, and especially corporate and financial economies, have moved to electronic, interest-bearingRead More

The Full Monty on Naked Short Selling

JP Koning has written an interesting post that depicts banks as engaging in “naked short selling” when they simultaneously create new loan assets and new deposit liabilities. For example, he compares the idea of systemic deposit creation with the case of selling Microsoft stock without owning the stock (shorting the stock) and also without borrowing theRead More