So-called helicopter money involves using a central bank’s power to create money to directly inject funds either into government coffers or straight into the pockets of the public. Yet nothing has been working and now the ECB is stating they will continue to buy in debt, but they will also buy corporate debt. The other side of the table lies the banks. The banks are advising the ECB what to buy so they can clean out the crap from their books. This is by no means anything in a text book on how to manage the economy for dummies. The ECB is just shooting in the dark hoping this will one day have some effect.

While in theory, this should be creating money that would be inflationary, no such impact would take place if all their are doing is buying in debt from banks who are desperate to get their balance sheets in order and this money is just monetizing money already lost. Hence, they are not really creating helicopter money until the real money supply increases and that passes through the banks and actually into the hands of the public which has NOT been taking place.

Central banks rely WAY TOO MUCH on commercial/investment banks who both front-run them in the markets as today. The ECB says they will buy corporates and the spread come in 30bp instantly because the banks have a buyer who has announced they will be a buyer. Those in government are really clueless. When Gordon Brown announced in advance he would see the British gold reserves, the price fell and the market bought the gold and then it rallied. Those in government have absolutely no idea of how markets function.

This is the same with the claimed market “manipulations” in currency and commodities. The banks knew where the stops were and knew when order would come in. The ALWAYS hunted for stops and moved spread according to the activity of the players. When you just trade, that is one thing. When you have inside info as to where those stops are, that become manipulation.

The banks just were front-running the ECB today and there is nothing wrong with that. If I said I was going to punch you in the face, will you just stand there and wait? Those in government are fools. Anyone would anticipate and move the market when you announce you will be buying billions.