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Get Ready To Be Showered By Helicopter Money

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http://www.telegraph.co.uk/finance/economics/12168909/Get-ready-to-be-showered-by-helicopter-money.html

First we had Zirp. Then Nirp. The language of central bankers sounds increasingly like the formal medical term for a nasty rash. We have already grown used to a zero interest rate policy over the past year. Over the past few months we have been gradually softened up for a negative interest rate policy.

Both now appear to have run out of road. Zero interest rates are not doing enough to stimulate flagging economies, while negative rates, by destroying the profitability of the banking system, may well do more harm than good. But don’t assume that will stop central banks trying to stimulate demand and raise inflation. The next likely option is “Hirp” – or helicopter money. And that is likely to involve some even crazier options, such as putting money into people’s banks accounts, mandating pay rises, or giving them the deposits for a house. None of it will work, of course – but that doesn’t mean we shouldn’t expect it to happen, or indeed position our portfolios to take advantage of it.

Only a few years ago, the idea that interest rates would be pushed down to zero would have been too outlandish to contemplate. For centuries, you had to pay something to borrow money, for the fairly obvious reasons that savers had to be rewarded for putting some of their cash aside, and because, if credit didn’t cost anything, there was no reason to limit the amount of debt you ran up. But after the financial crash of 2008, central banks ripped up that rulebook. Interest rates were pushed down to close to zero, as they had been in Japan since the 1990s, and apart from the recent tiny rate rise in the US, have stayed there ever since.

Well the government is already giving away small deposits, in the UK meaningful deposits for our housing stock would potentially be tens of thousands. And of course if the helicopter money goes to everyone it could cause those on benefits a few problems.

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An easy way would be to increase state/government employees wages. This would help consumption and also house prices. In a hyper-inflation those who get the money first are better off.

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ZIRP, NIRP, now HIRP. We seem to be transversing the alphabetic backwards, the only sensible conclusion is that we are heading towards GIRP, DIRP and BIRP. Although if you see people talking like this, it's probably too late for them.

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A shot of HIRP in the Spring budget? A little feelgood injection to get the housing market moving again? Worry about the cost later...

If it looks like Brexit, then what have Cameron, Carney and Osborne got to lose?

The City has millions set aside in escrow accounts for each one of them, no doubt, but they have to prevail. Whatever it takes.

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Matty Lynn must be trying to offload his BTLs.

:)

Deflation less costly than runaway inflation.

Government will not back down (protecting debtors and HPIers) until the market has shown them that they must. These arguments will have to be proven by the markets.

Paradoxically, that is more apt to happen when the masses are focussing on inflation.

Therefore, you can expect that fears and alarms about pending inflation (printy printy richy - wipeout savers - protect £Trillions in HPI Bubble on the owner side etc, vs massively priced out younger generations) will be on everyone's lips, even as asset deflation takes hold.

The newspapers are likely to run headlines about inflationary actions. Analysts who closely follow central bank policy will warn of debasement of the currency and the dangers of Latin American style inflation. You may even see sings that the reflation is working. Indeed, you may read the kind of news that fooled investors in April 1930.

-Davidson.

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My conclusion on this subject was that they would just start explicitly printing a percentage of government spending, not backed by debt or anything else for that matter. I called it Fiscal easing in a recent HPC topic. There would be some technical sounding process by which it would happen and a new Office of Official Officialdom to make sure it would never be abused (ha).

I think it would be more effective than lowering interest rates. You devalue the currency without the debt-frenzy distortions of free money. Helicopter money will never get off the ground :) Of course, there will be new distortions but the next lot can deal with that.

Fiscal easing wouldn't have been done in the past as it would have been so obviously irresponsible. Now, the central banks have mastered the art of being vigilant (ha) whilst saying something and nothing at the same time, most people simply couldn't care less. Oh look, a grumpy cat has just taken a selfie.....

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Meanwhile Gov annoys the 'money never runs out' / 'printy printy' crew with ever more cuts and cost saving measures.

You do all realise SMI is back to 39 weeks in a while. And as I recall it, soon to be made a loan. In the printy-printy helicopter tinfoil-hatting world of some hpcers, you'd think Gov would be paying the houses off.

The 13 week waiting period is a special measure and applies until 31 March 2016. (The previous waiting period was 39 weeks).

http://england.shelter.org.uk/get_advice/repossession/mortgage_arrears/support_for_mortgage_interest

Banks recapitalised, BTLers been lured in with greed to double down, so many outright owners singing their HPI mad-gainz. There's more clues to the direction of travel for a long time, imo.

I've got a credit card too. Doesn't mean I bang it with debt. I'd like to say it's clear but that's not true... avoided logging in to check balance after an expensive few months, and knowing I'll have to transfer money over from my savings. They're selling debt for a reason.

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A more radical idea would be directly putting money into people’s pockets. Technically, the Bank of England would simply credit everyone’s account with £1,000, or whatever sum it chose. A more subtle way of doing that might be through a basic citizen’s income, a proposal already being discussed in Finland and Switzerland, two countries either in or close to recession. Everyone could be paid £5,000 a year, and the central bank would pick up the tab.

The admin on working out which accounts they should put £1000 in would cost a fortune.

Upping the tax allowance by £1000 for a year does it much more effectively but only benefits those who work (and earn more than the tax allowance)

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The private banks create money out of thin air. Might as well let us have our share and be 'all in it together' :lol::lol:

I'd rather your BTL pal go bankrupt and get some HPC going.

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There is something far wrong in the UK that this is even being discussed.

It's the death throws of an empire if you ask me.

The people at the top have no idea how to keep their economy going.

I'd suggest war/invasion/slavery/drugs/theft/Coal/Steel/Steam power and murder....that's what the countries massive wealth was built on.

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There is something far wrong in the UK that this is even being discussed.

It's the death throws of an empire if you ask me.

The people at the top have no idea how to keep their economy going.

I'd suggest war/invasion/slavery/drugs/theft/Coal/Steel/Steam power and murder....that's what the countries massive wealth was built on.

Absolutely - when the Telegraph sounds more and more like ZeroHedge, you have to worry.

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