Kimball Corson on "What Bernanke Doesn't Quite Understand"

[Alan Avans]

""What doesn't occur to Bernanke is he could have a helicopter drop of
demand deposit accounting entries bolstering everyone's checking
account by the same amount thereby increasing aggregate demand
substantially without borrowing or taxing more. A negative income tax,
if you will.""

"Bernanke understands Milton Friedman's helicopter drop of money. He
indirectly, like me directly, was a student of Friedman's. Friedman
argued that if helicopters flew over and dropped money for all to
grab, after a suitable time for everything to equalize out, prices
would rise in proportion to the additional quantity of money dropped
so the quantity theory of money equation would be the same except for
higher prices and a larger money supply. Real variables would go
unchanged.

While Bernanke still thinks in those terms, he also realizes a new
loan simply consists of a deposit entry in a borrower's account and
that reserves held by the Fed of member banks are also just accounting
entries as well. But Bernanke gets hung up on the false household
budget analogy at that point and thinks the government can directly
increase spending only if it acquires more tax revenues or borrows
more money by the sale of treasury instruments. Printing money is, he
properly understands, not something governments actually do.

What doesn't occur to Bernanke is he could have a helicopter drop of
demand deposit accounting entries bolstering everyone's checking
account by the same amount thereby increasing aggregate demand
substantially without borrowing or taxing more. A negative income tax,
if you will. Now the Friedmanites at this point, with Bernanke
swaying, would argue that prices will rise proportionately and
generate inflation. But will it? And did Friedman really believe that
personally?

I mean lets look at the situation. The rich are sitting on tremendous
cash hoards they have pulled from circulation in the economy, plant
and equipment are sitting idle in huge quantities and we have enough
of our working age population not employed to start a new economy of
about the same size as ours. So inflation is not exactly breathing
down our necks. Deflation more threatens.

However, if inflation did rear its ugly head, the solution is hyper
easy. Forget efforts to mop up excess reserves as Bernanke has
mentioned, say by upping banks' reserve requirements. The government
could just reverse its effort (or "helicopter 'deposits' drop") and
impose a positive income tax and not spend the proceeds. A quick and
effective means to can inflationary pressures. Of course, the Fed
would have to coordinate with the Treasury, but how hard can that be.

Bernanke and too many economists simply don't get this. They don't
really understand money. They are still stuck on the household budget
analogy for the federal government. Friedman understood, but kept
quiet about it because it was too inconsistent with his personal
politics. But he said enough privately, looking back, to persuade me
he did. Bernanke missed that and still does."

[Steve Hummel BenFranklinWasRight]

Good analysis, except it doesn't include the most obvious motive and
that is that it is not in the self interest of Banks, who are
Bernanke's constituency. If GDP is 65-70% consumer finance and Social
Credit aims at eliminating that market..............

On May 22, 5:19 am, Alan Avans <cooperativecommonwea...@gmail.com>
wrote:

[Wallace Klinck]

Alan, where did this originate and what part, if any, is your own comment--the quotation marks appear to be inconsistent.
Wally

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[John G Rawson]

I'm sure Bernabcke knew very well what could have been done and put it the other way to make it appear ridiculous.  "Leopards don't change their spots".
J R
 

> Date: Wed, 22 May 2013 05:19:08 -0700
> Subject: [socialcredit] Kimball Corson on "What Bernanke Doesn't Quite Understand"
> From: cooperative...@gmail.com
> To: social...@googlegroups.com

[Alan Avans]

Wally, I'm quoting him from a Facebook entry. The first quote was
from within the body of his message, a passage that I wished to
highlight. All the words are his. I did not comment.

Regards
Alan

On May 23, 10:48 am, Wallace Klinck <wmkli...@shaw.ca> wrote:
> Alan, where did this originate and what part, if any, is your own comment--the quotation marks appear to be inconsistent.
> Wally
>