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Helicopters can go up as well as down

February 18 2013 Leave a comment

I commented on Gavyn Davies’ much-discussed article: Helicopters can be dangerous.

This line in particular struck me as odd: “The increase in the monetary base is temporary in the case of QE, and permanent in the case of OMF.”

OMF is overt monetary finance, which is apparently a “less inflammatory” term for helicopter money. I’m not exactly sure why Davies thinks helicopter money would be dropped permanently, or why he thinks anyone is arguing that this would be a good idea.

But what I find particularly obnoxious is how the City is now back to calling for common sense and fiscal restraint. Ha!

Remember, it was bankers who demanded the initial increase in the monetary base (through bailouts) as a way of preserving their bonuses, and it was bankers that drove monetary expansion in the years before the financial crisis as they earned fat margins from cavalier lending, but when someone suggests a monetary expansion that might actually benefit ordinary people… heaven forbid!

Of course, neither MMT nor modern monetarism are concerned with a permanent expansion of the monetary base anyway. The point is to take control of the money supply away from the banking cartel and using a rule-based system instead. Outside of the banking industry, this is not a remotely controversial idea.

The only restriction on what a sovereign nation can or cannot do is determined by the available resources, rather than some made-up limit on the amount of money (which can be created at will).

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