Helicopter money and the next recession

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samstar
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Helicopter money and the next recession

Post by samstar » Wed Jul 10, 2019 8:26 pm

Unemployment at historic lows, massive fiscal and monetary stimulus, asset prices at record highs....and we still can’t get any inflation!

So what happens in the next recession?? Deflation. The risk seems underestimated.

With few effective policy tools left, what will we do?? Helicopter money.

Any thoughts? I think this has a lot of implications for how you structure your hedging assets (tips vs ltt vs stt/cash, etc)

Fwiw (and I know BHers aren’t fans of predictions)...I think we hang out at 1-2% gdp growth for the next 2-3 years, then get stuck at -1 to 1% growth for several years.
At that point, Helicopter money starts looking like a good idea.

Imo 1/3 each tbill, ltt and tips protects against a lot of scenarios.

Dottie57
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Re: Helicopter money and the next recession

Post by Dottie57 » Wed Jul 10, 2019 8:41 pm

never mind.
Last edited by Dottie57 on Wed Jul 10, 2019 9:19 pm, edited 1 time in total.

livesoft
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Re: Helicopter money and the next recession

Post by livesoft » Wed Jul 10, 2019 8:51 pm

In my opinion, not worrying about things protects against all the things that never come to pass. I don't need T-bills to implement that.
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samstar
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Re: Helicopter money and the next recession

Post by samstar » Wed Jul 10, 2019 8:52 pm

https://www.brookings.edu/blog/ben-bern ... money/amp/

And from a Fortune article
The term was invented by famed conservative economist Milton Friedman, who used the metaphor of dropping money down from a helicopter to illustrate the fact that a determined central bank could cause inflation if it really wanted to, if by no other means than simply handing out free money. “In theory at least, helicopter money could prove a valuable tool,” Bernanke writes. “In particular, it has the attractive feature that it should work even when more conventional monetary policies are ineffective and the initial level of government debt is high.”

slick_dealer_05
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Re: Helicopter money and the next recession

Post by slick_dealer_05 » Wed Jul 10, 2019 8:52 pm

I use VTMFX - buy and hold forever without thinking whether market will go up or down

Beensabu
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Re: Helicopter money and the next recession

Post by Beensabu » Wed Jul 10, 2019 8:59 pm

samstar wrote:
Wed Jul 10, 2019 8:26 pm
Unemployment at historic lows
This is not true. The number is not the number. The system knows. Higher inflation would be disastrous.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next."

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Ricchan
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Re: Helicopter money and the next recession

Post by Ricchan » Wed Jul 10, 2019 9:12 pm

And here I thought I'd be reading a thread about the pros and cons of buying a helicopter during a recession. :P

Regarding unemployment numbers, while the unemployment percentage among people seeking employment is at impressive lows, the percentage of people in their prime working years who are actually seeking employment is also at a low. I don't know if it is a historic low or not, but it's low enough that the fed chairman made it a point to mention it during his testimony to congress today.

KlangFool
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Re: Helicopter money and the next recession

Post by KlangFool » Wed Jul 10, 2019 9:17 pm

OP,

If you believe what you had posted, keeping a fair amount of cash on hand is a good hedge towards deflation.

I know nothing. So, I hedged my bets with cash, gold, mortgage, bond, and stock.

KlangFool

bhsince87
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Re: Helicopter money and the next recession

Post by bhsince87 » Wed Jul 10, 2019 9:21 pm

What do you mean, no inflation?

It's running around 1.8% this year, which is probably within measurement error of the Fed's target.
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samstar
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Re: Helicopter money and the next recession

Post by samstar » Wed Jul 10, 2019 9:31 pm

bhsince87 wrote:
Wed Jul 10, 2019 9:21 pm
What do you mean, no inflation?

It's running around 1.8% this year, which is probably within measurement error of the Fed's target.
Well, I consider that very low considering where we are in the expansion and all the stimulus that’s been used.

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samstar
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Re: Helicopter money and the next recession

Post by samstar » Wed Jul 10, 2019 9:36 pm

livesoft wrote:
Wed Jul 10, 2019 8:51 pm
In my opinion, not worrying about things protects against all the things that never come to pass. I don't need T-bills to implement that.
If you keep an allocation to hedging assets, by definition you’re protecting against some risks. Why not take a view on the scenarios you want to protect against?

No one has a crystal ball but that shouldn’t be mistaken for assuming all risks are equally likely.

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Re: Helicopter money and the next recession

Post by LadyGeek » Wed Jul 10, 2019 9:40 pm

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