Despite the increasing perception of policy divergence between The US and the rest of the world, it appears 'factors beyond the control of the central planners' has stymied hope for any US-based sparking of global growth. Between The Fed's liquidity withdrawal and the deflationary tsunami from an emerging world buried in credit-fueled mal-investment, it is increasingly clear that central banks have lost control and everything is now going down together.
Dreams of decoupling have once again been dashed on the shores of 'lagging' business cycles...
As Citi's Willem Buiter recently noted, "everything's failed" so how long before we see the money drop?
So now what? Well, this.
Buiter concludes:
The case for helicopter money is therefore partly to ensure the euro area (and some other advanced economies) reflate powerfully enough to escape the liquidity trap, rather than settle in a lasting rut of low-flation and low growth, with “emergency” levels of asset purchases and interest rates becoming the norm.
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In orderly markets and with the policy rate at the ELB, the central bank can talk loudly, but on its own – without the fiscal support required to turn its monetized balance sheet expansions into helicopter money drops – it carries but a small stick.
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If, as seems possible, the ECB will increase, in H1 2016, the scale of its monthly asset purchases from €60bn to, say, €75bn, and if these additional purchases are concentrated on public debt, the euro area will benefit from a ‘backdoor’ helicopter money drop –something long overdue.
He is right.
So let's stop pretending that the Fed has a chance in hell of reflating the economy by hiking rates just as the recession begins, and fast forward to the inevitable next step: the beginning of the end for fiat, starting with its widespread paradop above populated urban centers, much to the delight of millions of people everywhere, and a few very big and very underwater debtors, for whom runaway inflation is just what the Doctor (of economics) ordered.
Charts: Bloomberg