Economists Views on Helicpter Money, Inflation and Death of the Dollar 5-4-2022
This is how Helicopter Money is Causing Hyperinflation
The Nomad Economist: Premiered 2 hours ago
Why do we hear so much about Helicopter Money lately? Here is what you need to know about the theory that for decades has inspired the work of famous economists and which has now has become strongly topical again.
Many confuse the idea of helicopter money with that of quantitative easing (QE). QE is an unconventional monetary operation designed by the central bank to purchase government bonds held by banks in exchange for liquidity.
In essence, the central bank acts as a captive buyer of the outstanding bonds. The effect provoked by QE is to lower interest rates, making it less expensive to finance consumption and investments. However, this indirect QE stimulation mechanism did not work entirely as households and businesses were reluctant to borrow money despite negative interest rates.
The helicopter money option is primarily a fiscal intervention that introduces new net financial assets into the private sector, stimulating the real economy directly and immediately, without passing through the financial system.
For this reason, Helicopter money is also defined by the term People's QE.
Is there a Hyperinflation risk? One of the main risks associated with money launched from helicopters is that it could lead to a significant devaluation of the currency and an exponential growth in inflation or even hyperinflation.
As more money is printed and the supply increases, the value of the domestic currency may, in fact, decrease significantly. Since 1920, 56 documented episodes of hyperinflation have occurred, some of which involved monetizing public debt in order to support government spending now out of control.
The danger is that the decision-making process of governments will become increasingly dependent on helicopter money and that any remaining constraints against excess paper money in the system would be abolished.
The most famous cases of hyperinflation are those who have exploded in the Weimar Republic, Zimbabwe, and Venezuela. All of this historical evidence shows that human nature plays an important role in ensuring that helicopter money can truly be successful.
Peter Krauth: Crush Inflation and Profit as the Dollar Dies
Palisades Gold Radio: 5-4-2022
Peter feels the Fed is largely trapped between inflation and being unable to raise rates by much. Inflation will continue to run and people will have to get used to it.
We're looking at prices doubling in just a few years. If they don't want their retirement stolen they better look at inflation hedges.
He feels silver is very undervalued compared to almost any other metal. Silver remains the only metal that is still below its 1980 high and on an inflation-adjusted basis. Silver is volatile but that's not a good reason to not have exposure. Silver is utilized 55% by industry and three quarters come from the production of other metals as a by-product.
If the price of silver rises it may not have much effect on the producer's margins. In 2020 when the pandemic started and there was a lot of interest in silver the ETFs brought in 330 million ounces. This was four times the previous year's levels.
ETF units tend to stick around and the number of ounces tends to remain in these funds. Silver tends to outperform gold during a bull market and this may be caused by the perception of high gold prices. They feel like they get more with silver instead and it becomes a natural alternative. He discusses the best macro factors for gold and why real rates are very telling of where precious metals will head.
He also provides us with a chart that compares home prices with silver and why that could be an opportunity. He discusses some warning signs that silver may be peaking at price. Also, a gold-silver ratio of 30 along with the Dow to silver ratio could be an important signal. If you look at these indicators together it should paint a pretty clear signal.
Peter believes that CBDC will exacerbate inflation problems because it will make printing and distributing money easier. Physical gold and silver have no counterparty risk and no risk from a lack of internet or electricity. They are private and have all the ideal characteristics of what money should be.