It Begins: Australia's Largest Investment Bank Just Said "Helicopter Money" Is 12-18 Months Away
Today, one day after the Fed according to some finally lost its credibility, none other than Australia's largest investment bank, Macquarie, just made the case that helicopter money is not only coming, but has a "very high" probability of commencing its monetary paradrops over the next 12-18 months.
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Time for a policy U-turn? Back to the future: British Leyland
From conventional QEs to more unorthodox policies
As discussed (here and here), we do not believe that investors are likely to benefit from acceleration in growth rates, trade or liquidity and indeed on the contrary, negative feedback loops from EMs to DMs imply that neither would be able to support global growth.
Secular stagnation is the key explanatory variable (here). The deflationary pressures from overleveraging, overcapacity and technology shifts can be either allowed to work through economies or public sector needs to continue resisting via expansionary policies.
Since '08, monetary policies were doing most of the lifting with limited participation by fiscal authorities (bar China). In other words, in the absence of either private or public sectors driving higher velocity of money, it was CBs that were supplying incremental liquidity to preclude contraction of nominal GDP and avoid stronger deflationary pressures. However, marginal utility of incremental injections has been declining (witness much lower impact of recent ECB's QE and increase in BoJ accommodation since Dec '14).
Part of the reason for monetary stimulus fading is that supply of US$ remains low. Global economy continues to reside on a de-facto US$ standard and current incremental supply is almost non-existent (depending on definition growing at +2%/-1% clip vs. average since '01 of ~15%). In other words, due to lack of recovery in the US velocity of money and lack of QEs, global economy is not getting enough US$ to continue leveraging.
as efficacy of conventional monetary QE is questioned
At the same time efficacy of continuing with conventional QE policies is being challenged and not just by independent observes but also 'insiders' (such as recent SF Fed paper). As
velocity of money globally continues to fall, conventional QEs have to become exponentially larger, as marginal benefit declines. If public sector is not prepared to step aside, what other measures can be introduced to support nominal GDP and avoid deflation?
There are several policies that could be and probably would be considered over the next 12-18 months. If private sector lacks confidence and visibility to raise velocity of money, then (arguably) public sector could. In other words, instead of acting via bond markets and banking sector,
why shouldn't public sector bypass markets altogether and inject stimulus directly into the 'blood stream'? Whilst it might or might not be called QE, it would have a much stronger impact and unlike the last seven years, the recovery could actually mimic a conventional business cycle and investors would soon start discussing multiplier effects and positioning in areas of greatest investment.
British Leyland failed, but it might work at least for a while
British Leyland (formed from nationalized British car companies in the late '60s) destroyed its automotive industry but for a time it provided employment and investment. CBs directly monetizing Government spending and funding projects would do the same. Whilst ultimately it would lead to stagflation (UK, 70s) or deflation (China, today),
it could provide strong initial boost to generate impression of recovery and sustainable business cycle. It could also significantly shift global terms of trade (to the benefit of commodity producers) and cause a period of underperformance by our 'Quality & Stability' portfolio and improve performance of 'Anti-Quality' screen. What is probability of the above policy shift? Low over next six months; very high over the longer term.
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What's most disturbing about the above assessment is that Macquarie realizes this last ditch attempt to preserve the status quo will fail, but will - if nothing else - buy another 12-18 months.
So is that the event horizon countdown: 1-2 years... and then?
http://www.zerohedge.com/news/2015-...-bank-just-said-helicopter-money-12-18-months
We all have our nose in the trough I tell you.. Welfare payments for Families, Negative gearing, Spend $20,000 tax free for small business.. We live in a welfare state with everyone having their nose in the trough. 
The list goes on and on.
