The Perils of Helicopter Money: Risks & Implications

The Dangers of Helicopter Money

Helicopter money is here, and nobody is complaining about it, in fact, they want more and more. It may seem surreal to those that have some semblance of common sense left, but at this stage and for several years to come, nobody is going to give a damn about the national debt. What will catch the level-headed individuals with their pants down is that the dollar will not crash; this is the most favoured outcome or the outcome based on old-school logic, and hence the odds of it coming to pass are very low. As we stated before, the dollar could surge to new highs. Market update July 12, 2020

What Is helicopter money? It’s the art of creating money out of thin air at an insane rate. To do this, governments must manufacture a disaster, like the financial crisis of 2008 and the current COVID-19 pandemic.

Once the manufactured crisis is blown out of proportion, the Fed has the power to create as much money as it deems fit, for the masses are in a state of hysteria and willing to accept anything that appears to provide a solution, even though the so-called solution is going to cost them a fortune in the years to come. Stupidity knows no limits.

Helicopter Money: Risks and Consequences for the Economy

Whenever central bankers worldwide come out with new stimulus measures, the masses jump up for joy and ask for more. Gone are the days when they complained about a terrible Fed, now the Fed is excellent. As they have conned the masses into believing they are the saviours, they will pump more money into the system over the next five years than they pumped in the previous 50 years; the clock started in March of 2020. Be ready for mass insanity on a scale you could never envision today.

The perils of Helicopter money

While bullish sentiment has risen a bit, it’s still trading well below its historical average, but how does one account for the rise in bearish sentiment? Only in the twilight zone would such a development make sense. We are starting to see the first real-time signs of how this market will confound everyone; more on this phenomenon later in this update. The Nasdaq has surged to new highs, the Dow has recouped most of its losses, and the masses are still nervous. From an investment perspective, the longer they remain nervous, the higher the odds of the Nasdaq testing the 30K ranges. Eventually, the Nasdaq will replace the Dow as the primary index to follow as AI will continue to dominate the investment scene.

You are going to see some big names get destroyed before this bull is over as these big names in their infinite wisdom, will decide to take on the Fed and as expected, they will end up dead as in dead broke. Market update July 12, 2020

Challenge the Fed: End up Dead

We don’t know when this will transpire, but in one fell, several big names will be destroyed to send a compelling but chilling message; challenge us and we will take you out no matter how big you think you are.

The last time our indicators on the Nasdaq were trading at this level was around March of 2017, and after that, the Nasdaq went on to tack on another 35%. Without factoring in the enormous amounts of money that the Fed will continue to feed into this market, or the tremendous amount of money that’s parked in bonds or money market accounts, the Nasdaq should be in a position to trade to the 14850 to 15000 range before a substantial correction takes hold.

And as excepted the experts will scream the end is nigh, the markets will pull back sharply, the masses will panic, and only the Tactical Investor will jump up in joy, break out an expensive bottle of champagne/booze and buy like there is no tomorrow. The following significant correction will fuel an even stronger countermove, which could take Nasdaq past 30K. However, we are getting ahead of ourselves. Let’s focus on the present.

Exploring the Risks and Dangers of Helicopter Money

Inflation: One of the main concerns with helicopter money is the risk of inflation. Direct cash transfers to the public can increase demand for goods and services, leading to higher prices and inflationary pressures. If inflation is not controlled, it can negatively impact the economy, such as reducing the purchasing power of consumers, increasing costs for businesses, and causing interest rates to rise.
Moral Hazard: Another danger of helicopter money is the potential for moral hazard. If people come to expect regular cash transfers from the government, they may become less motivated to work or save, leading to long-term economic consequences. Additionally, if helicopter money is seen as a way to bail out failing businesses or sectors, it can create moral hazard by encouraging reckless behaviour and creating a dependence on government support.
Fiscal Sustainability: Helicopter money can also have implications for fiscal sustainability. If the government cannot fund the cash transfers through tax revenues or borrowing, it may resort to printing money, leading to inflation and devaluation of the currency. In the long run, this can adversely affect the economy and reduce the government’s ability to fund essential programs and services.
Political Interference: Finally, helicopter money can be subject to political interference, particularly if the central bank’s independence is compromised. If politicians have control over the distribution of cash transfers, they may use this tool for political gain or to appease certain interest groups rather than for the benefit of the economy as a whole.

In summary, while helicopter money can be an effective policy tool for stimulating economic growth and addressing downturns, it also poses risks and dangers. These include the potential for inflation, moral hazard, fiscal sustainability, and political interference.

Resources on Helicopter money

These articles offer different perspectives on the benefits and dangers of helicopter money. They may be helpful for gaining a more comprehensive understanding of the issue.

“The Risks of Helicopter Money” by Kenneth Rogoff (Project Syndicate, 2016): https://www.project-syndicate.org/commentary/helicopter-money-risks-by-kenneth-rogoff-2016-06
“The Case for Helicopter Money” by Adair Turner (Project Syndicate, 2016): https://www.project-syndicate.org/commentary/case-for-helicopter-money-by-adair-turner-2016-03
“Helicopter Money: A Beginner’s Guide” by Mark Gilbert (Bloomberg Opinion, 2020): https://www.bloomberg.com/opinion/articles/2020-04-15/helicopter-money-a-beginner-s-guide
“The Helicopter Money Debate: Why Some Economists Love it – and Why Others are Skeptical” by Paul Solman (PBS NewsHour, 2016): https://www.pbs.org/newshour/economy/the-helicopter-money-debate-why-some-economists-love-it-and-why-others-are-skeptical
“The Dangers of Helicopter Money” by David Marsh (MarketWatch, 2016): https://www.marketwatch.com/story/the-dangers-of-helicopter-money-2016-04-20