On Aug. 26, the Council on Foreign Relations (CFR) offered a unique suggestion to help Americans who have been unable to recover from the 2007-08 Credit Crisis and subsequent Great Recession. In a page taken out of former Fed Chairman Ben Bernanke's playbook for printing money so great that it would be likened to 'raining down money from a helicopter', this high level think tank is proposing that Congress create new tax incentives that would not only give cash back directly to the people, but also help facilitate the use of this money as a means to accommodate the Federal Reserves upcoming quandary of when they will need to raise interest rates and close down the QE spigot to fend off rising inflation.
In an article published in Foreign Affairs, the primary source publication for the Council on Foreign Relations, the author addresses the coming crossroads for the Federal Reserve on how they could both stimulate asset prices without having to cause a liquidity squeeze by raising interest rates in what is now appearing to be an inflationary environment.
Moments ago a stunning article appearing in the "Foreign Affaird" publication of the influential and policy-setting Council of Foreign Relations, titled "Print Less but Transfer More: Why Central Banks Should Give Money Directly to the People."
Governments must do better. Rather than trying to spur private-sector spending through asset purchases or interest-rate changes, central banks, such as the Fed, should hand consumers cash directly. In practice, this policy could take the form of giving central banks the ability to hand their countries’ tax-paying households a certain amount of money. The government could distribute cash equally to all households or, even better, aim for the bottom 80 percent of households in terms of income. Targeting those who earn the least would have two primary benefits. For one thing, lower-income households are more prone to consume, so they would provide a greater boost to spending. For another, the policy would offset rising income inequality. - Zerohedge
While this suggestion is very interesting, and would cater to many conservatives and libertarians alike who feel the tax code is far too draconian, the sad part about this proposal is that it could have been done much smoother back in 2008 when the Credit Crisis hit and threatened to take down the entire U.S. financial system. Instead of Congress and the Fed bailing out the banks with tens of trillions of dollars in both taxpayer money, and new debt issuance, Congress could have borrowed less than $5 trillion to pay off all residential real estate loans that were mortgaged by the American people, and that money would have been transferred directly into bank coffers, allowing them plenty of capital and liquidity to remain solvent. In the meantime, by paying off these mortgages for homeowners, it would have lessened the debt burdens of U.S. citizens who could have then taken the extra money to pay off debt, invest in small businesses and corporations, or continue spending which in all three cases would have stimulated the economy and avoided the Great Recession altogether.
Unfortunately for this idea by the CFR, the U.S. has increased their debt by more than 100% since 2008, and the ramifications of printing money (QE) has led nations throughout the world to begin rejecting the dollar and reserve currency. And to now suggestion and facilitate a new round of increase to the money supply through the form of direct cash rebates to the American people via their taxes, would only magnify the dollars ongoing issues, and result in a short-term increase in GDP as people use the money to either pay off existing debt, or purchase goods only so long as the Fed can keep the money flowing.