Whether Japan admits it or not, helicopter money - thanks to Ben Bernanke - is here, and the market's reaction this week was simply the first stage of pricing it in, as confirmed by the biggest drop in the Japanese currency this century.
Incidentally, we are "confident" that the SEC will inquire whether Citadel- Ben Bernanke's official employer - was actually short the Yen ahead of its employee going to Japan and advising the Bank of Japan what to do, and how to crush its currency. Obviously that would be a grandiouse, and criminal, conflict of interest.
Breath - Primer - Courtesy - Goldman - Sachs
We won't be holding our breath, but while we wait here is a useful primer for all those wondering just what is coming, courtesy of Goldman Sachs, which explains the nuances of monetary policy's endgame: Helicopter Money.
Q1: What does helicopter money refer to in the first place?
A1 - Policy - Government - Bank - Supplies
A1: Literally, it is a policy whereby the government or central bank supplies large amounts of money, as if it were scattering money from a helicopter. A more practical definition, however, is a policy whereby the central bank has primary responsibility for funding to facilitate more flexible and active fiscal spending by the government. The concept of helicopter money has been around for years. Professor Milton Friedman was first to propose the idea in 1969, and in the early 2000s then Federal Reserve Board Governor Ben Bernanke raised it as one prescription to prevent deflation. Very recently, a July 13 Sankei Newspaper article suggesting Prime Minister Abe and his advisers were considering helicopter money sparked debate on the subject in Japan.
The first scheme is referred to as monetization. This was actually done in Japan under Takahashi fiscal policy in the 1930s, which served as a model for Abenomics (see Q4 for details).
Scheme - JGB
The second scheme, although not involving direct JGB...
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