Helicopter Money: Way Out of Crisis or Fallacy of Traditional Economics?

>The reason why inflation "officially" is lower then what one would expect given the amount of money printed lies in the way it is calculated.

I think comparing over a long period of time makes sense to see if something really fundamentally changed about the value of money lately.

>Your argument would have been much more precise and useful if you focussed on the same timeframe as I did: 2010-2020.

If things were really different over the past decade than any other, you'd expect to find discrepancies when comparing to previous decades. You're the one "muddling" it here in my (poorly educated) opinion.

I must add that you using Bitcoin, an insanely speculative asset, as an example of things becoming more expensive over the past decade didn't really help your point in my mind. It seems to imply that Bitcoin's value is somewhat stable and we can use it as a reference for the value of a dollar. If you used Beanie Baby prices instead we're in the middle of a huge deflation!

Real Estate is not quite as bad as a reference point, but we have to remember that the decade started right at the end of the mortgage crisis so that distorted the prices somewhat (in what direction? I'm not sure).

QE didn't start until November 2008 (gold = $814) That stopped by Nobember 2014 (gold = $1232). 51% increase in gold over 6 years, or 7% per year.

That is far lower than the increase in gold in other 6 year periods which didn't have QE.

If you are going to define bull markets as inflation, then you are ruling out the possibility that the economy can ever just do well. We had a horrible crash a decade ago. In the last couple of years, the economy has done well with record low unemployment. Of course equity prices went up.

The price of collectibles like rare art or comic books could go up or down a lot but the general economy doesn't care about those assets.

Or influence other people into thinking that either of those are going to happen?

If there are more dollars floating around in the economy, more people may be able to afford to buy tomatoes and more people become price insenstive (e.g. software engineers in SV do not care if tomaatoes are $2/kilo or $4/kilo, they'll still buy). As a seller you'll raise prices and see no drop in demand, ergo prices go up.

On the primacy of the dollar: we walk by faith, not by sight.

But in contrast, can anyone name a 20th century country with deflationary policy who broke under sanctions or came off badly when involved in a war?

Flirting with deflation is much safer policy than flirting with inflation. Although a fair point that hyperinflation is associated with cascades of failures that still suggests that flirting with high inflation is more destabilising than flirting with very low credit levels. If anyone responded to cascades of failures by highly deflationary policy they don't seem to have made it into the well-known-failed-states pile.

Japan is a pretty classic tried-deflation example and they ended up a really stable, well organised society that honestly looks like a pretty nice place to live. Well educated. Modern. One of the leading countries on the Asian continent in fact. People complain that the rich aren't getting rich fast enough in Japan which I don't think is a great complaint.

Maybe not hyperinflation, but Turkish inflation was rarely below 60% from the late 70s until 2002, and in the last few years has been in the 15-25% range.

Just the same way you see drug dealers "cutting" down their product to skim some off the top and pass it on to the unknowing consumer, the newly created money becomes a way to skim money without the citizenry knowing exactly whats going on.

Monetary inflation isn't a natural law. If you don't do it, it doesn't happen.

https://tradingeconomics.com/japan/current-account

On a more global note, each economy is different and one can’t expect the same results from similar measures. The MMT advocates saying that ‘The economy is not a household’ and ‘Deficit does not matter’ advocate for a very dangerous path to walk for many countries that can’t print a strong currency.

That's not the case with deflation in general; there were deflationary episodes before the 1930s where this didn't happen (e.g. https://en.wikipedia.org/wiki/The_Great_Deflation). The difference in the 30s is that a wage floor was imposed, so wages couldn't fall to adjust to the increased purchasing power of the dollar, so there was massive unemployment. Labour economists nowadays refer to this as "sticky wages".

Imagine if there was 90% deflation now. A dollar would buy ten times more, but a minimum wage worker would be ten times more expensive. If the minimum wage wasn't adjusted downwards to match the deflation, then suddenly nobody could afford to pay minimum wage, so a huge amount of people would be out of a job.

On practical measures, Japan looks like a massive success story. It looks like the best >100mil population country outside the Anglosphere, with whom it is perfectly competitive.

My family jokes sometimes that we wish we could still afford Japanese goods. I heard that the reason we don't see many Japanese students in Australian universities is because the Japanese system is too good.

I mean, why are we avoiding this sort of failure? It looks a lot like our success. The Japan of today isn't the Japan of ten years ago, but is this the worst case scenario of deflationary policy? Where are the failures?

It's no coincidence that the stock market started to rally and corporate monopolies started to form at around the same time as the gold standard was abolished. We have never had so many massive companies in the history of mankind.

Most employees who work there don't feel that they're adding value (e.g. https://www.newyorker.com/books/under-review/the-bullshit-jo...), most of their customers don't feel that they're getting value (how long do they have to put you on hold on the phone? How many times do we only choose a company because there are no other alternatives?)... Who is getting value out of their existence?

Dollars enter the economy when the Federal Reserve creates reserves out of thin air and trades those new reserves for treasuries or other assets.

Dollars are destroyed when the Federal Reserve sells off assets on its balance sheet.

Taxation plays absolutely no role in this process. The Federal Reserve controls the monetary base. This would be true even if the federal government levied zero taxes.

> Governments don't need to tax in order to spend, they are the issuers of the currency.

Governments can earn revenue entirely from selling bonds or printing money - you're absolutely right that they don't need to tax in order to spend. However, this statement doesn't back up your assertion that governments destroy money through taxation.

> The government doesn't need your tax dollars in order to spend. As the issuer of currency, it can will as much money into existence as it wants. So collecting taxes is simply a way to regulate the money supply, control inflation and provide a base level of demand for the currency.

A tax does not remove money from the money supply, it simply transfers money to the government. Taxes could be increased and government spending increased yet further, and the net result is an increase in money supply, disproving your claim because the only causal factor is what government is doing with the money supply. Similarly, in a non-fiat system, such as a gold standard or even just specie, taxation does not reduce the money supply any more than storing the money under a mattress. This is a distortion or at least a misconception of what money is. The better analysis of these considerations would be as Cantillon effects.

These solutions in my mind are better described as distributed systems that allow independent verification and audit of data and transactions from within the system itself.

This is useful when the data being shared involved spans multiple entities in terms of responsibility, ownership, value, and other impacts. Rather than having to rely on other mechanisms of verification the system itself is able to provide that verifiability at scale.

Essentially you're using a technology layer, which is a collection of existing concepts put together in a somewhat novel use, to disintermediate more expensive verification solutions.

I think it makes a lot of sense if you examine the value chain of securities lending (from creation of the instrument, custody, to lending, custody transfer, and finally audit and compliance).