Fed Gives Up; Yellen Getting Closer to Helicopter Money
June 15, 2016 (EIRNS)—Saying that the U.S. economy "has weakened" and that the American labor market had deteriorated since their April meeting, Federal Reserve Board Chair Janet Yellen and the Federal Open Market Committee waved the white flag today on their rhetorical dream of raising interest rates and "returning to normalcy." After Germany’s long-term interest rate went negative today, "markets" expect that the Federal Reserve’s short-term rates could be forced into negative territory, also for the first time ever.
Banking systems across Europe and the United States are crumbling under this impossible regime, which is associated with collapsing capital investment and productivity, and with borrowing for securities speculation only.
Today Yellen again raised the possibility of issuing "helicopter money," newly printed mass issues of Federal Reserve notes, which are placed directly into government, household, pension, or business accounts. Ben Bernanke called it a "money-financed fiscal program"; in other words, the Fed printing new money for the government to spend.
For Yellen, rather than being a policy the Fed studies "only theoretically"—as she said after the March meeting—it was today "a monetary tool that legitimately could be considered in extreme circumstances." This would be "a "very abnormal extreme situation where one needs an all-out attempt" to rescue the economy, Yellen said.
This hyperinflationary insanity was, in fact, being publicly urged on the Fed today by former Financial Stability Board chairman Lord Adair Turner; HongKong and Shanghai Bank chief economist Stephen King; Deutsche Bank chief strategist Jim Reid ("it’s likely to be seen as the next major policy response"); Oxford Economics chief Gabriel Stein on Bloomberg News, and other desperadoes of the collapsing trans-Atlantic financial system. Former Treasury Secretary Lawrence Summers, in the Washington Post, limited himself to merely advising the Fed to get with a negative short-term rate soon, in order to create all the inflation possible.
Just talk of helicopter money is associated with a situation in which both bank lending, and bank stocks, are falling sharply across the trans-Atlantic and Japan; actually carrying out a "money-financed fiscal program" would likely shut down bank lending almost entirely.