Thursday, April 21, 2016

The Euro Zone Embraces 
"Helicopter Money"
Free marketeer Thorsten Polleit sees the European Central Bank (ECB) as worried about deflation & thinks that the bank could institute helicopter money as an approach the bank thinks will work .. "Things are not so simple, however. Any increase in the quantity of money leads to a redistribution of income and wealth among people. The first receivers of the new money can buy goods at still unchanged prices, while the later receivers can buy goods only at already elevated prices. The former will therefore become richer at the expense of the latter .. The latest interest in helicopter money is closely related to the problems created by today’s fiat money regime. Fiat money is produced through credit expansion, and it makes the economy’s overall debt grow in excess of income. As a result, the debt-to-income ratio keeps climbing, sooner or later bringing about a situation of over-indebtedness." .. references to what happened in the French Revolution period - when the government decided to issue helicopter money - it resulted in hyperinflation & a breakdown in the economy .. "From a political-economic viewpoint, the idea that helicopter money could be used wisely appears to be illusory. By suggesting it may, at some stage, turn the euro into helicopter money, the ECB has entered a slippery slope: Issuing helicopter money could prove to be a dangerous, and perhaps even fatal, blow to the euro’s already frail political-economic architecture."
LINK HERE to the essay

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