Business Insider is reporting some comments by Willem Buiter, an economist with Citigroup in London, that are absolutely shocking. Start with these recommendation to central banks:
– (i)reducing rates, first by lowering them all the way to zero (UK and euro area), then by eliminating the effective lower bound on nominal interest rates (all four currency areas);
– (ii) carrying out more imaginative forms of quantitative easing (QE) & credit easing (CE), in all four currency areas, by focusing on outright purchases of and/or loans secured against less liquid and higher credit risk securities, subject to a sovereign guarantee (joint and several in the euro area) for all such risky central bank exposures;
– (iii)engaging in helicopter money drops (all four currency areas): a combined fiscal- monetary stimulus.
The bottom line is that he advocates opening the money sluices at the central banks to create economic growth. This is a reckless statement that reflects no real understanding of what money is. The monetization of sovereign guaranties throws loan standards out the window and invites moral hazard in. The rich will get richer, and poor will get, well, poorer, because these economies would stagnate. Perhaps they would see stagflation, the worst of both worlds.
According to one of my fellow Austrians, “Buiter is a Certified Monetary Crank (CMC) of the highest order. His ideas draw from the most nutty aspects in the history of crankism.”
Hat tip to Michael Pollaro