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Message for Helicopter Ben!

July 25, 2012

Listen up, Ben, I have a solution or policy option for you to consider!

You have stated many times in your testimonies to Congress that you fear Deflation and that you desire Asset Inflation (at least to a degree that will pump up asset prices from existing levels). Would you like to implement a policy that would accomplish this objective? I have the solution. Contact the Bureau of Engraving and Printing and request that they PRINT UP notes (mostly $20’s , $50’s, and $100) to the tune of (say) $16 trillion. That would be step #1. Step #2 would involve identifying a distribution program (say the top 200 American Cities) where you could drop these notes (full legal tender notes) on the population of each City. Think about this policy for a minute.

With some $16 trillion in paper notes (divided between the 200 largest American Cities) you could fly your helicopter over each City and drop these paper notes on the populace. What would this policy accomplish? First of all, you can bet that the recipients of these paper notes (we could call them Hunter/Gatherers) would pick-up every paper note and SPEND this money rapidly. What would this create? I would suggest that this policy would create an immediate and substantial STIMULUS for our economy leading to more employment and more spending. Retail sales would increase. Car purchases would increase. Travel and entertainment would increase. Home purchases would increase. All this would lead to an increase in employment and also some ASSET price increases (inflation). Give this idea some thought!

 Why hasn’t anyone suggested this policy to date? Personally, I think it is because most financial pundits and economists don’t fully understand what you are now doing that isn’t working. Are you aware, Ben, that creating digital money units and increasing your asset purchases via the computer is not allowing money units to get to real people who will SPEND these units? What you now do is increase your System Open Market Account (SOMA) by typing in numbers (billions and trillions) and electronically sending these money units to the BIG DEALER banks and similar financial institutions. What are these TBTF institutions doing with these units? Are they lending these units to the public, consumers, and small business persons? I don’t think so!
Since all the trillions that you and your Committee have created to date (mostly excess reserves) are not getting to real SPENDERS and INVESTORS, the result is NO REAL STIMULUS for the real economy. Furthermore, all your efforts and policies to date have not increased employment or asset prices (as you desire). My policy would get physical paper notes OUT to the consuming public and the small business persons. The immediate publicity and media attention that you would receive also would accomplish a STIMULUS (for all Americans) that has evaded you to date. Your image is Helicopter Ben. Why not play off this IMAGE?

What you have been doing via QE1 and QE2 and Operation Twist is the creation of money units BUT these money units are not getting to the right SOURCES. What is now needed is to get some physical money units (paper notes) out to Consumers and Small Business Investors. The Helicopter Drops would create the result that you DESIRE!
History shows that Inflation and Asset price increases will occur if you get ‘barrels’ of new MONEY out to the masses. The new units will get SPENT and this will then STIMULATE our economy. What do you think? You have your next FOMC meeting next week and then again in September. Why not consider this option?
Pass this missive on to Chairman Bernanke for consideration!
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