July 18, 2016

Deutsche Bank Loves Helicopter Money: Why "Big Inflation Is Coming... But Will First Require A Crisis"

Just over a month ago, Deutsche Bank's chief economist David Folkerts-Landau, unleashed an epic rant against the ECB, warning of social unrest and another great depression unless the ECB changes its ways. Some thought that DB was genuinely concerned about central planning, and was urging the ECB to stop all intervention altogether, but that naive read was quickly stomped out just one week ago when it emerged that the Deutsche Bank economist was merely acting out of purely selfish reasons when he called for a €150 billion bailout of Europe's banks, with the unspoken demand that Deutsche Bank should be on the very top.

Finally, any doubt was squashed this weekend, when DB's macro strategist Alan Ruskin issued a positively glowing review of Helicopter Money, barely stopping short of demanding it be unleashed immediately. To wit:

Because Helicopter money is less directed at using currency weakness as a core transmission mechanism than QE or particularly negative rates, Helicopter money should be more, rather than less acceptable to an international community worried about currency wars.

What was less emphasized is that unlike NIRP, "helicopter money", if it works, pushes the long end of the yield curve higher ahead (after all the endgame is soaring, if not hyper, inflation), something the global banking sector cripped by trillions in debt,desperately needs, and thus is precisely what Deutsce Bank needs, whose stock continues to trade just barely off all time lows.

As such, any delusions that DB was raging against failed monetary policy in general can be forgotten. All DB wanted was monetary policy that benefits, drumroll, Deutsche Bank... as the following amusing DB table "ranking" various monetary approaches shows. Needless to say, DB really likes helicopter money.

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