Could the government start handing out free cash?
It sounds crazy. But believe it or not, it’s a real possibility. In fact, an Ivy league economist just predicted it will happen within five years…
If you’ve been reading the Dispatch, you know the Federal Reserve has used crazy monetary policies to “stimulate” the economy since the 2008 financial crisis. These policies have been huge failures. After seven years, the U.S. economy is barely growing.
Yet, instead of acknowledging its failure, the government is preparing to double down. And its friends in the lapdog media think it’s time for “helicopter money.”
• Yesterday, The Wall Street Journal published an article titled, “The Time and Place for ‘Helicopter Money’”…
It was the top story in The Wall Street Journal’s “Economy” section.
Economist Milton Friedman coined the term “helicopter money” in 1969. He suggested the government could drop free cash from helicopters to stimulate the economy. People would collect the money and spend it. The economy would grow as a result.
Friedman likely never took this cartoonish idea seriously. For a long time, hardly anyone else did either.
• But The Wall Street Journal argues helicopter money could jumpstart the economy…
Of course, the government wouldn’t actually drop bills from a helicopter. Instead, it would print money and mail checks to people…or deposit the money directly into people’s bank accounts.
People would instantly become “richer.” Then they would buy more televisions, cars, and homes. This would goose the economy, according to The Wall Street Journal.
• Financial media giant Bloomberg agrees…
Yesterday, it published an article titled, “Milton Friedman’s ‘Helicopter Money’ Is Looking Less Crazy.” According to the author, “helicopter money feels very much like an idea whose time may be coming.”
Central bankers and Ivy League economists like the idea. Mario Draghi, who heads the European Central Bank, recently called it a “very interesting concept.”
Richard Clarida, an economist at Columbia University, thinks we could see helicopter money within five years.
• Helicopter money is rooted in bad economics…
It’s based on the idea that spending fuels the economy. Casey Research founder Doug Casey explains why this is false.
It’s part of the Keynesian view, in which spending and consumption drive the economy. This isn’t just wrong, it’s the exact opposite of what’s true. It’s production and saving that drive an economy. You have to save to build capital, and capital is necessary for…everything. What these people are doing is destructive of civilization itself. And when we go into the next crisis, governments will use the disastrous results of their own policies as excuses to enact even more destructive versions of the same things.
• The U.S. government’s other “stimulus” measures have failed miserably…
After the 2008 financial crisis, it borrowed huge amounts of money. Acting through the Federal Reserve, it created 3.5 trillion dollars out of thin air. And the Fed has held its key interest rate near zero for seven years.
These extreme measures were supposed to help the economy. But the U.S. economy is growing at the weakest pace since World War II. The real median household income is lower today than it was in 2007.
• The Fed’s reckless policies did accomplish one thing…
They caused stocks and bonds to soar. The S&P 500 has more than tripled over the past seven years. It hit an all-time high last May. Prices for bonds also hit record highs. Because stocks and bonds soared while the real economy barely grew, we call this the “Alice in Wonderland” economy.
The Fed has set us up for disaster. Doug Casey explains:
These reckless policies have produced not just billions but trillions in malinvestment that will inevitably be liquidated. This will lead us to an economic disaster that will, in many ways, dwarf the Great Depression of 1929–1946. Paper currencies will fall apart, as they have many times throughout history.
• Gold is your best defense against reckless governments…
As the ultimate form of money, gold has preserved wealth for centuries. Gold is money because it’s durable, divisible, easy to transport, has intrinsic value, and has consistent form around the world. And unlike paper currencies, the government can’t print gold and hand it out to people.
Once people realize the government has set us up for a financial catastrophe, bubbles in the stock, bond, and commercial property markets will pop. Investors will flock to gold. We expect this to ignite a “gold mania” that will dwarf the recent seven-year rally in U.S. stocks.
• Gold stocks will soar…
Dispatch readers know gold stocks offer leverage to the price of gold. A 200% jump in the price of gold can cause the average gold stock to rise 400% or more. The best gold stocks can soar 1,000%…2,000%…or higher.
Physical gold is your defense against destructive governments. Gold stocks are your “offense.” They’re a way to make big profits on government stupidity.
However, gold stocks aren’t for everyone. They’re extremely volatile. It’s common for a gold stock to rise or fall 10% in a day. If you don’t want this kind of volatility, stick with physical gold. Doug expects the price of gold to at least triple from current levels.
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Now is the perfect time to take a position in gold stocks. If you’ve been following the Dispatch, you know the fund GDX, which tracks large gold miners, has already rallied 52% this year. But it’s pulled back significantly in the past few days, giving us a good entry point. Click here to take advantage of the incredible opportunity in gold stocks.
Chart of the Day
It’s never been harder to make money in government bonds…
Today’s chart shows the total value of government bonds outstanding by interest rate. As you can see, nearly 90% of these bonds yield less than 2%. And 29% of them—for a total of $7 trillion—have negative interest rates.
Negative rates sound bizarre to most people. With negative rates, you pay interest on bonds you own. It’s a perversion of saving and a perversion of capitalism. Negative interest rates could only exist in a world with idiot politicians in control.
The European Central Bank and Bank of Japan are trying to stimulate their economies with negative rates. They think negative rates will encourage people to spend money.
So far, it’s been a huge failure. Like the U.S., Europe and Japan are growing at the slowest pace since World War II.
Delray Beach, Florida
March 23, 2016
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