E Kyle Bass Says Helicopter Money Is The Only Way Out

Kyle Bass had an interesting take on the state of the Fed's effectiveness. He concluded by saying that helicopter money is the only way out, which is the most important thing that he said, but he said other interesting things as well that make helicopter money look like the only way that all central banks can offer stimulus at the same time, throughout the world.

As Tyler Durden has said, Bass believes that QE doesn't work well when everyone is doing it. In fact, he says a central banker told him that QE should only be done by one nation. That severely limits the effectiveness of QE when everyone is doing it. He goes on to say that non sterilized QE, which is more like helicopter money, must be the only tool left for the central banks.


Permission granted by J Kyle Bass Wikipedia

Non Sterilized QE means that the central bank expands base money without offsetting that expansion with a contraction elsewhere. Here is the Investopedia definition of sterilization. 

Sterilized intervention involves two separate transactions: 1) the sale or purchase of foreign currency assets, and 2) an open market operation involving the purchase or sale of U.S. government securities (in the same size as the first transaction). The open market operation effectively offsets or sterilizes the impact of the intervention on the monetary base.

Of course, real helicopter money as defined by Eric Lonergan is non sterilized. It amounts to a permanent increase in the money supply by offering everyone money in place of lending it to them. It does not require the usage of bonds, and it does not increase the debt of government, it only expands the balance sheet of the central banks. It would be shared by the central bank in a window of 12 to 18 months, allowing the central bank to monitor the goal of getting rates to move higher off the zero bound and out of negative where necessary. It would not be Universal Basic Income, which would require permanent transfers of money to the people.

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Disclosure: I am not an investment counselor nor am I an attorney so my views are not to be considered investment advice.

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Gil Richards 4 years ago Member's comment

Couldn't agree with you more Gary.

Gary Anderson 4 years ago Author's comment

Thanks, Gil. We are hoping that people realize the most responsible approach is #HelicopterMoney, not the futility we see with QE.