Global demand, as we’ve seen, is in the doldrums. The evidence is everywhere. Goldman sees freight rates remaining subdued until at least 2020. BofAML notes that the slump in global trade of goods and services hasextended into Q2. Perhaps most telling of all, the International Labor Organization blames lackluster global demand for subpar post-crisis employment trends, which in turn has shaved an estimated $3.7 trillion off global GDP since 2008.
Despite it all, the answer is always “not enough Keynes” (more cowbell) which is why we said the following more than a month ago (we also predicted this back in September of 2013):
For those wondering how this will play out, consider that sooner or later, in order to avoid liquidation and stave off severe disinflationary pressures, someone will have to call in "Helicopter Janet" and once the cash paradropping begins well, we'll see you in the Weimar Republic.
Sure enough, the semi-official helicopter cash drop call is here via Bloomberg View’s Clive Crook. Abandon all sound money faith ye who read on:
But QE isn't unconventional any longer. It mostly worked, the evidence suggests. The world avoided another Great Depression. Yet even in the U.S., this is a seriously sub-par recovery; growth in Europe and Japan has been worse still. Now imagine a big new financial shock. It's quite possible that all three economies would fall back into recession. What then?
We don’t like where this is going already, please don’t tell us more…
Sooner rather than later, attention therefore needs to turn to a new kind of unconventional monetary policy: helicopter money…
The idea is far from crazy. Lately, more economists have been advocating it, and they're right.
The logic is simple. If central banks need to expand demand -- and interest rates can't be cut any further -- let them send a check to every citizen.
Read the rest here...