Sunday, April 3, 2016

Nick Rowe has a point on helicopters

Helicopter Money is Permanent

The shocks in a random walk process are permanent. That does not mean it is impossible for a positive shock to be followed by a negative shock. It does mean it is equally likely that a positive shock will be followed by a positive shock as by a negative shock. That's what I mean by "permanent".
The monetary banker (currency banker) clears the bets when new inside investments become  monetized. Its job is to entice parts of the economy to monetize or demonetize.  The monetary banker is like a theater, you pay to get in, and the monetary banker pays you to get out.  When the line in and out are far apart in arrival times,  the in-out distribution begins to have negatives, losses.  The monetary banker watches the in-out distribution, and clears the bets when it spreads to far.

So, every action taken by the monetary banker comes from a surprise, and the monetary banker must entice insiders to declare their surprise by borrowing or saving; at the short end.  The actual value of money is that it does not predict the future, it discovers the immediate past.  The reason monetary banker do not collapse is that hey keep the in and out lines short, so after any surprise resets balances, only one or two bets remain in the queue.

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