The Tower that Toppled a Terrible Technology

By Harvey Wasserman

There it stood, 500 feet of insult and injury.  And then it crashed to the ground.  

The weather tower at the proposed Montague double-reactor complex was meant to test wind direction in case of an accident.  In early 1974, the project was estimated at $1.35 billion, as much as double the entire assessed value of all the real estate in this rural Connecticut Valley town, 90 miles west of Boston.

Then---39 years ago this week---Sam Lovejoy knocked it down.  

Lovejoy lived at the old Liberation News Service farm, four miles from the site.    Montague’s population of about 7500 included a growing number of “hippie communes.”  As documented in Ray Mungo’s FAMOUS LONG AGO, this one was born of a radical news service that had been infiltrated by the FBI, promoting a legendary split that led the founding faction to flee to rural Massachusetts.

And thus J. Edgar Hoover---may he spin in his grave over this one---became an inadvertent godfather to the movement against nuclear power.

When the local utility announced it would build atomic reactors on the eastern shore of the Connecticut River, 180 miles north of New York City, they thought they were waltzing into a docile rural community.  But many of the local communes were pioneering a new generation’s movement for organic farming, and were well-stocked with seasoned activists still working in the peace and civil rights movements.  Radioactive fallout was not in synch with our new-found aversion to chemical sprays and fertilizers.  Over the next three decades, this reborn organic ethos would help spawn a major on-going shift in the public view toward holistic food that continues today.  

For those of us at Montague Farm, the idea of two gargantuan reactors four miles from our lovely young children, Eben and Sequoyah, our pristine one-acre garden and glorious maple sugar bush...all this and more prompted two clear, uncompromising words:  NO NUKES!  

We printed the first bumper stickers, drafted pamphlets and began organizing.

Nobody believed we could beat a massive corporation with more money than Lucifer.  An initial poll showed three-quarters of the town in favor of the jobs, tax breaks and excitement the reactors would bring.

For us, one out of four of our neighbors was a pretty good start.

But nationwide, when Richard Nixon said there’d be 1000 US reactors by the year 2000, nobody doubted him.  Nuclear power was a popular assumption, a given supported by a large majority of the world’s population.  We needed a jolt to get our movement off the ground.  

That would be the tower.  All day and night it blinked on and off, ostensibly in warning to small planes flying in and out of the Turners Falls Airport.  But it also stood as a symbol of arrogance and oppression, a steel calling card from a corporation that could not care less about our health, safety or organic well-being.

So at 4am on Washington’s Birthday (which back then was still February 22), Sam knocked it down.  In a feat of mechanical daring many of us still find daunting, he carefully used a crow bar to unfasten one...then two...then a third turnbuckle.  The wires on the other two sides of the triangulated support system then pulled down six of the tower’s seven segments, leaving just one 70-foot stump still standing.  It was so loud, Sam said, he was “amazed the whole town didn’t wake up.”  

But this was the Montague Plains, the middle of nowhere.  Sam ran to the road and flagged down the first car---it happened to be a police cruiser---and asked for a ride to the Turners Falls station.  Atomic energy, said his typed statement, was dangerous, dirty, expensive,  unneeded and, above all, a threat to our children.  Tearing down the tower was a legitimate means of protecting the community.  

This being Massachusetts, Sam was freed later that morning on his personal promise to return for trial.  Facing a felony charge in September, he was acquitted on a technicality.  A jury poll showed he would have been let go anyway.  

The legendary historian Howard Zinn testified on Sam’s behalf.  So did Dr. John Gofman, first health director of the Atomic Energy Commission, who flew from California to warn this small-town jury that the atomic reactors he helped invent were instruments of what he called “mass murder.”

The tower toppling and subsequent trial were pure, picturesque reborn Henry Thoreau, whose beloved Walden Pond is just 50 miles down wind.    

Sam was the perfect hero.  Brilliant, charismatic, funny and unaffected, his combination of rural roots and an Amherst College degree made him an irresistible spokesperson for the nascent No Nukes campaign.  

Backed by a community packed with activists, organizers, writers and journalists, the word spread like wildfire.  Filmmaker Dan Keller, an Amherst classmate, made Green Mountain Post’s award-winning LOVEJOY’S NUCLEAR WAR, produced on a shoe string, seen by millions on public television, at rallies, speeches, library gatherings, classrooms and more throughout the US, Europe and Japan.  For a critical mass of citizen-activists, it was the first introduction to an issue on which the fate of the Earth had quietly hinged.  

In 1975, Montague Farmer Fran Koster helped organize a TOWARD TOMORROW Fair in Amherst that featured green energy pioneer Amory Lovins and early wind advocate William Heronemus.  A vision emerged of a Solartopian energy future, built entirely around renewables and efficiency, free of “King CONG”---coal, oil, nukes and gas.

Then the Clamshell Alliance took root in coastal New Hampshire.  Dedicated to mass non-violent civil disobedience, the Clam began organizing the first mass protests against twin reactors proposed for Seabrook.  In 1977, 1414 were arrested at the site.  More than a thousand were locked up in National Guard armories, with some 550 protestors still there two weeks later.  

Global saturation media coverage helped the Clam spawn dozens of sibling alliances.  A truly national No Nukes movement was born.  

On June 24, 1978, the Clam drew 20,000 citizens to a legal rally on the Seabrook site that featured Pete Seeger, Jackson Browne, John Hall and others.  Nine months prior to Three Mile Island, it was the biggest US No Nukes gathering to that time.

So when the 1979 melt-down at TMI did occur, there was a feature film---THE CHINA SYNDROME---and a critical mass of opposition firmly in place.  As the entire northeast shuddered in fear, public opinion definitively shifted away from atomic energy.  

That September, NO NUKES concerts in New York featured Bonnie Raitt, Jackson Browne, Graham Nash, Bruce Springsteen, James Taylor and many more.  Some 200,000 people rallied at Battery Park City (now the site of a pioneer solar housing development).  The NO NUKES feature film and platinum album helped certify mainstream opposition to atomic energy.

Today, in the wake of Chernobyl, Fukushima and decades of organizing, atomic energy is in steep decline.  Nixon’s promised 1000 reactors became 104, with at least two more to shut this year.  New construction is virtually dead in Europe, with Germany rapidly converting to the Solartopian future promised so clearly in Amherst back in 1975.

Sam Lovejoy has kept the faith over the years, working for the state of Massachusetts to preserve environmentally sensitive land---including the Montague Plains, once targeted for a massive reactor complex, now an undisturbed piece of pristine parkland.  

Dan Keller still farms organically, and still makes films, including a recent “Solartopia” YouTube starring Pete Seeger.  Nina Keller, Francis Crowe, Randy Kehler, Betsy Corner, Deb Katz, Claire Chang, Janice Frey and other Montague Farmers and local activists are in their 40th year of No Nukes activism, aimed largely at shutting nearby Vermont Yankee---a victory that soon may be won.  Anna Gyorgy, author of the1979 NO NUKES sourcebook, writes from Bonn on Germany’s epic shift away from atomic power and toward renewables.    

Rare amongst the era’s communes, Montague Farm has survived in tact.  In an evolutionary leap, it became the base for the Zen Peacemaker organization of Roshi Bernie Glassman and Eve Marko.  They preserved the land, saved the farmhouse, converted the ancient barn to an astonishing meditation center, and culminated their stay with a landmark gathering on Socially Engaged Buddhism.  A new generation of owners is now making the place into a green conference center.  

Like Montague Farm, the No Nukes movement still sustains its fair share of diverse opinions.  But its commitment to non-violence has deepened, as has its impact on the nuclear industry.  Among other things, it’s forced open the financial and demand space for an epic expansion of Solartopian technologies---especially solar and wind, which are now significantly cheaper than nukes.

In the wake of that, and of Fukushima, new reactor construction is largely on the ropes in Europe and the US.  But President Obama may now nominate a pro-nuclear Secretary of Energy.  More than 400 deteriorating reactors still run worldwide, with escalating danger to us all.  China, Russia, and South Korea still seem committed to new ones, as does India, where grassroots resistance is fierce.    

There’s also talk of a new generation of smaller reactors which are unproven, untested, and unlikely to succeed.  The decades have taught us that  money spent on any form of atomic energy (except for clean-up) means vital resources stripped from the Solartopian technologies we need to survive.  

We’ve also learned that a single act of courage, in concert with a community of dedicated organizers, can change the world.  The No Nukes movement continues to succeed with an epic commitment to creative non-violence.  

In terms of technology, cost and do-ability, Solartopia is within our grasp.  Politically, our ultimate challenge comes with the demand to sustain the daring, wisdom and organic zeal needed to win a green-powered Earth.

For that, we’ll do well to remember the sound of one tower crashing.  

------------------------

Harvey Wasserman’s SOLARTOPIA!  OUR GREEN-POWERED EARTH is at www.harveywasserman.com, as is HARVEY WASSERMAN’S HISTORY OF THE US, written at Montague Farm, introduced by Howard Zinn.  This article was first published on thewe bite of the Progressive Magazine, www.progressive.org. 

Fed can fix the economy

From:  Asia Times Online

By Ellen Brown

Quantitative easing (QE) is supposed to stimulate the economy by adding money to the money supply, increasing demand. But so far, it hasn't been working. Why not? Because as practiced for the last two decades, QE does not actually increase the circulating money supply. It merely cleans up the toxic balance sheets of banks. A real "helicopter drop" that puts money into the pockets of consumers and businesses has not yet been tried. Why not?

When Ben Bernanke gave his famous helicopter money speech to the Japanese in 2002, he was not yet chairman of the Federal Reserve. He said then that the government could easily reverse a deflation, just by printing money and dropping it from helicopters.

"The US government has a technology, called a printing press (or, today, its electronic equivalent)," he said, "that allows it to produce as many US dollars as it wishes at essentially no cost."

Later in the speech he discussed "a money-financed tax cut", which he said was "essentially equivalent to Milton Friedman's famous 'helicopter drop' of money". Deflation could be cured, said Professor Friedman, simply by dropping money from helicopters.

It seemed logical enough. If the money supply were insufficient for the needs of trade, the solution was to add money to it. Most of the circulating money supply consists of "bank credit" created by banks when they make loans. When old loans are paid off faster than new loans are taken out (as is happening today), the money supply shrinks. The purpose of QE is to reverse this contraction.

But if debt deflation is so easy to fix, then why have the Fed's massive attempts to pull this maneuver off failed to revive the economy? And why is Japan still suffering from deflation after 20 years of quantitative easing?

On a technical level, the answer has to do with where the money goes. The widespread belief that QE is flooding the economy with money is a myth. Virtually all of the money it creates simply sits in the reserve accounts of banks.

That is the technical answer, but the motive behind it may be something deeper.

An asset swap is not a helicopter drop
As QE is practiced today, the money created on a computer screen never makes it into the real, producing economy. It goes directly into bank reserve accounts, and it stays there. Except for the small amount of "vault cash" available for withdrawal from commercial banks, bank reserves do not leave the doors of the central bank.

According to Peter Stella, former head of the Central Banking and Monetary and Foreign Exchange Operations Divisions at the International Monetary Fund:

[B]anks do not lend "reserves"... Whether commercial banks let the reserves they have acquired through QE sit "idle" or lend them out in the internet bank market 10,000 times in one day among themselves, the aggregate reserves at the central bank at the end of that day will be the same. [1]

This point is also stressed in Modern Monetary Theory. As explained in the paper by Professor Scott Fullwiler:

Banks can't "do" anything with all the extra reserve balances. Loans create deposits - reserve balances don't finance lending or add any "fuel" to the economy. Banks don't lend reserve balances except in the federal funds market, and in that case the Fed always provides sufficient quantities to keep the federal funds rate at its... interest rate target. [2]

Reserves are used simply to clear checks between banks. They move from one reserve account to another, but the total money in bank reserve accounts remains unchanged. Banks can lend their reserves to each other, but they cannot lend them to us.

QE as currently practiced is simply an asset swap. The central bank swaps newly created dollars for toxic assets clogging the balance sheets of commercial banks. This ploy keeps the banks from going bankrupt, but it does nothing for the balance sheets of federal or local governments, consumers, or businesses.

Central bank ignorance or intentional sabotage?
That brings us to the motive. Twenty years is a long time to repeat a policy that isn't working.

UK Professor Richard Werner invented the term quantitative easing when he was advising the Japanese in the 1990s. He says he had something quite different in mind from the current practice. He intended for QE to increase the credit available to the real economy. Today, he says: MORE

Insurer with NY's 'worst' record of complaints gets $340M Obamacare loan

From:  The Examiner 

  

VIDEO

A health insurance company headed by an old friend from when President Obama was an Illinois state senator got a $340 million federal loan to establish Obamacare co-ops in New York, New Jersey and Oregon despite having a chronic record of consumer and regulatory complaints.

The New York-based Freelancers Insurance Company has been rated the "worst" insurer for two straight years by state regulators, and data compiled by a national insurance association show an extremely high rate of consumer complaints.

The firm was founded in 2008 by Sara Horowitz, who worked with Obama while he was in the Illinois state senate to launch Demos, a left-wing, New York think tank funded in part by George Soros.

Before May 13, 2011, the Demos website described Horowitz and Obama as members of the founding group in 1999 that became "the core of Demos' staff and Board of Trustees."

Sometime between that date and Nov. 6, 2011, the Obama reference was deleted, according to cached versions of the site stored by the Internet Archive's Wayback Machine.

Before incorporating FIC, Horowitz had established the Freelancers Union, a nonprofit organization that describes itself as offering "health insurance and other benefits, plus advocacy, solidarity, and resources for freelancers and independent workers."

In 2012, Horowitz's FIC won the largest single award under an obscure Obamacare provision that allocates $2 billion to establish 24 co-ops to compete against private insurers and state health insurance exchanges. Co-ops are collectively owned organizations that produce goods or services for the benefit of members instead of for profit.

The funds are awarded as tax-free loans by the U.S. Department of Health and Human Services' Center for Consumer Insurance Information and Oversight.  MORE

Shirfting Direction for Local Control - Cottage Food Law

 From:  Ed Hat
 

Cottage Food Law updated: Feb 25, 2013, 10:31 AM

Source: Public Health Department

New Cottage Food Law Offers Business Opportunities

The California Homemade Food Law was passed in September 2012 and became effective January 2013. This law opens the door for a growing movement of community- based food production in home kitchens, sometimes called "cottage food".

The new law allows microenterprises that prepare low-risk foods to operate without investing in a commercial kitchen. The law lists the specific low-risk foods that are allowed to be prepared in a cottage food operation. The new law does not extend to products containing meat or dairy, but allows baked goods, granola, trail mix, popcorn, candies, dried fruit, coffee, tea, jams, jellies, vinegar, mustard, pickles and other low-risk items.

There are two types of cottage food operations. Class A cottage food operations (direct sale to the consumer only), must register on-line with Santa Barbara County Environmental Health Services and submit a completed "self-certification checklist". Class B cottage food operations (direct sale to the consumer and/or indirect sales through a middleman), have additional requirements and must be inspected and permitted by Environmental Health Services.

Larry Fay, Director of Environmental Health Services stated, "This offers great opportunities for our community. Cottage Food Operations promote locally produced products and brings the consumer closer to producer." He also reinforced that it is important that operators work within the framework and guidelines of the cottage food law to assure the products are safe for consumers. Improperly prepared food can lead to foodborne illness.

Individuals who are considering initiating a new cottage food operation or are interested in additional information about the law are encouraged to learn more. Santa Barbara County has developed guidelines for cottage food operators within the County that are available on the website www.sbcphd.org/ehs. There is additional information on the California Department of Public Health website: www.cdph.ca.gov.

When They Came for the Raw Milk Drinkers…

From:  Rockwell.com 

by Ron Paul 

While I oppose most gun control proposals, there is one group of Americans I do believe should be disarmed: federal agents. The use of force by federal agents to enforce unjust and unconstitutional laws is one of the major, albeit overlooked, threats to liberty. Too often Americans are victimized by government force simply for engaging in commercial transactions disproved of by Congress and the federal bureaucracy.

For example, the offices of Rawesome Foods in Venice, California, have been repeatedly raided by armed federal and state agents, and Rawesome’s founder, 65-year-old James Stewart, has been imprisoned. What heinous crime justified this action? Rawesome sold unpasteurized (raw) milk and cheese to willing customers – in a state where raw milk is legal! You cannot even drink milk from a cow without a federal permit!

This is hardly the only case of federal agents using force against those who would dare meet consumer demand for raw milk. In 2011 armed agents of the Food and Drug Administration (FDA) raided the business of Pennsylvanian Amish farmer Dan Allgyer. Federal agents wasted a whole year and who knows how many millions of our tax dollars posing as customers in order to stop Allgyer from selling his raw milk to willing customers.

The use of force against individuals making choices not approved of by the political elite does not just stop with raw milk. The Natural News website has documented numerous accounts of federal persecution, including armed raids, of health food stores and alternative medical practitioners.

Federal bureaucrats are also using force to crack down on the makers of gold coins for fear that people may use these coins as an alternative to the Federal Reserve’s fiat currency. Bernard von NotHaus, the founder of Liberty Dollars, is currently awaiting sentencing on federal counterfeiting charges — even though Mr. von NotHaus took steps to ensure his coins where not used as “legal tender.”

Yet, the federal government was so concerned over the possibility that Mr. von NotHaus’s customers might use his coins in regular day-to-day commerce they actually labeled Mr. von NotHaus a “terrorist.”

These type of police state tactics used against, among others, raw milk producers, alternative health providers, and gold coin dealers is justified by the paternalistic attitude common in Washington, D.C. A member of Congress actually once told me that, “The people need these types of laws because they do not know what is good for them.” This mindset fuels the growth of the nanny state and inevitably leads to what C.S. Lewis said may be the worst from of tyranny “…a tyranny exercised for the good of its victims.”

All Americans, even if they do not believe it is a wise choice to drink raw milk or use gold coins, should be concerned about the use of force to limit our choices. This is because there is no limiting principle to the idea that the government force is justified if used “for our own good.” Today it is those who sell raw milk who are being victimized by government force, tomorrow it could be those who sell soda pop or Styrofoam cups. Therefore, all Americans should speak out against these injustices.

From:  Rockwell.com

Decentralization Hidden in the Dark Ages

From:  Bionic Mosquito

For longtime readers, this is a condensed version of the several posts I have made on this subject.  I have also added a minor amount of new material.

Examples of decentralized society in history are often hidden.  They are hidden because those in decentralized societies never bothered to keep records.  They are also hidden for the purposes of the current state.  I have previously written about anarchy in the Southeast Asian Highlands as one example.  Here, I will present the time of the Middle Ages as another.

This time offered a system of private law.  A law not based on the edicts of the king, but based on local tradition and culture.  The king was not above the law, but equally subject to it.  For law to be law, it must be both old and good.  Each lord had a veto power over the king and over each other law (I will use the term “lord” for those landed free men.  Even the serfs could not be denied their right without adjudication.  Land was not held as a favor from the king; title was allodial.  A man’s home truly was his castle.

Although the term has fallen out of use in the academic community, for many this period is known as the Dark Ages – with all of the associated stereotypes: barbarians, boorish behavior, and the uncivilized society that came to Europe with the fall of the much more civilized Rome.

From Wikipedia:

The Dark Ages is a historical period used for the first part of the Middle Ages. The term emphasizes the cultural and economic deterioration that supposedly occurred in Europe following the decline of the Roman Empire.  The label employs traditional light-versus-darkness imagery to contrast the "darkness" of the period with earlier and later periods of "light".

The (Not So) Dark Ages

How did people live absent a strong central power (Rome)?  In what manners was governance achieved?  How did such a society evolve over the centuries into the nation-states of Europe?  From whose perspective were these ages “dark”? 

Hans-Hermann Hoppe, in his essay entitled “On the Impossibility of Limited Government and the Prospects for a Second American Revolution,” makes reference to certain aspects of this time period in history:

Feudal lords and kings did not typically fulfill the requirements of a state; they could only "tax" with the consent of the taxed, and on his own land every free man was as much a sovereign (ultimate decision maker) as the feudal king was on his.

Tax payments were voluntary.  On his land, each free man was as sovereign as the king.  This doesn’t seem so “dark.”

Hoppe quotes Robert Nisbet:

The subordination of king to law was one of the most important of principles under feudalism.

The king was below the law.  This might be one factor as to why the time period is kept “dark.”

Hoppe references a book by Fritz Kern, “Kingship and Law in the Middle Ages.”  The book was originally written in German in 1914, and is a thorough and eye-opening examination of the relationship of king and lord during this time period, as well as the relationship of both king and lord to the law.  I will rely upon, and will quote extensively, from this book throughout this essay.  Except as noted, all quoted items will be from this book.

During the early Middle Ages, there was no concept of a Divine Right of Kings, nor did the earlier period hold to the idea of kingship by birthright.  These ideas developed over the centuries and only took shape in the late Middle Ages.  Contrary to these, in the early Middle Ages…

…an act of popular will was an essential element in the foundation of government….

To become king required consent of those doing the choosing.  Additionally, the king did not hold absolute power:

…even the rudiments of an absolutist doctrine had scarcely appeared.

Both the king and the people were subservient to the law – and not an arbitrary law, but a law based on custom, “the laws of one’s fathers.”

All well-founded private rights were protected from arbitrary change….

Germanic and ecclesiastical opinion were firmly agreed on the principle, which met with no opposition until the age of Machiavelli, that the State exists for the realization of the Law; the power of the State is the means, the Law is the end-in-itself; the monarch is dependent on the Law, which is superior to him, and upon which his own existence is based.

The king and the people were not bound to each other, but each was bound to the Law, giving all parties responsibility to see that the integrity of the Law is maintained.  A breech by one imposed an obligation on the other to correct the breech.  The relationship of each party (king and lord) was to the Law, not to the other party, and each had duty to protect it.

Contrast this to the situation today: whereas today it is an illegal act for the people to resist the government authority, during this period after the fall of Rome the lords had a duty to resist the king who overstepped his authority.  This is not to say that such challenges went unopposed by the king –physical enforcement by the lords was occasionally required – however, the act of resistance in and of itself was not considered illegal.  It was a duty respected by king and people alike.

Read more »

Sunday, February 17, 2013

Ron Paul Dot Com 2.1

This is version 2.1 because it is not a completely new version, but only a clarification of one aspect of my previous post.

I ended my last post on this topic as follows:

I am certain there are many details of the regulatory procedures that I have not captured….I am open to further understanding on this issue.

In reviewing my previous article and some of the links, I found a glaring instance of just such a miss.  It was right under my nose, in an LRC blog post….

ICANN has four approved arbitration organizations.

In that light, I offer the following from ICANN:

Complaints under the Uniform Dispute Resolution Policy may be submitted to any approved dispute-resolution service provider listed below. Each provider follows the Rules for Uniform Domain Name Dispute Resolution Policy as well as its own supplemental rules.

There are four listed dispute-resolution service providers, one of which is WIPO – the provider housed within the UN.  This is counter to what I had previously written:

ICANN has chosen WIPO to adjudicate such disputes.

There is something else from the above-mentioned LRC post:

Because the RP.com guys registered Ron's name in Australia, the international arbitration option must be used.

In my quick review of the four providers, one seems to be US-based, one in Europe, and one in Asia.  The fourth is WIPO. 

Still, this leaves some room for conflict with the language at the ICANN site, which states that claims may be submitted to any provider on the list.  Is it possible that the language at the ICANN site is a general statement, with many devils in the many details?  After all, lawyers and regulators rarely write so clearly and succinctly. Is it possible that it is ICANN and not the claimant that selects the provider, based on factors of the specific claim?  As indicated at LRC, could geography determine?  The statement could be read this way:

Complaints under the Uniform Dispute Resolution Policy may be submitted [by ICANN] to any approved dispute-resolution service provider listed below.

Or this way:

Complaints under the Uniform Dispute Resolution Policy may be submitted [by Claimant] to any approved dispute-resolution service provider listed below.

I have no idea, but this could explain and therefore eliminate the seeming conflict.  It would take someone familiar with such proceedings to clarify this language.  That isn’t me.

As I have mentioned before and will do so again: I have no opinion one way or another about which party will prevail in this issue, nor does it make any difference to me.  I know little about the details of the dispute, and virtually nothing about the law.  I have no desire to get in Ron Paul’s head and figure out why he did this.  My intent has been to answer and remains in answering the following:

1)      What is the process?

2)      Is there some violation of libertarian principle / NAP in Ron Paul’s action?

I am working on a follow-up post.  In this upcoming post, I will summarize some of the discussion that my earlier post generated, including further developing some of my replies.  I will also address some statements made in a Huffington Post article on this subject.  Finally, I will further develop my views regarding UN involvement in this matter.

How the Fed Could Fix the Economy—and Why It Hasn’t

From:  Common Dreams

by Ellen Brown

 

Quantitative easing (QE) is supposed to stimulate the economy by adding money to the money supply, increasing demand. But so far, it hasn’t been working. Why not? Because as practiced for the last two decades, QE does not actually increase the circulating money supply. It merely cleans up the toxic balance sheets of banks. A real “helicopter drop” that puts money into the pockets of consumers and businesses has not yet been tried. Why not?  Another good question . . ..

When Ben Bernanke gave his famous helicopter money speech to the Japanese in 2002, h

e was not yet chairman of the Federal Reserve.  He said then that the government could easily reverse a deflation, just by printing money and dropping it from helicopters. “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent),” he said, “that allows it to produce as many U.S. dollars as it wishes at essentially no cost.” Later in the speech he discussed “a money-financed tax cut,” which he said was “essentially equivalent to Milton Friedman’s famous ‘helicopter drop’ of money.” Deflation could be cured, said Professor Friedman, simply by dropping money from helicopters.

It seemed logical enough. If the money supply were insufficient for the needs of trade, the solution was to add money to it. Most of the circulating money supply consists of “bank credit” created by banks when they make loans. When old loans are paid off faster than new loans are taken out (as is happening today), the money supply shrinks. The purpose of QE is to reverse this contraction.

But if debt deflation is so easy to fix, then why have the Fed’s massive attempts to pull this maneuver off failed to revive the economy? And why is Japan still suffering from deflation after 20 years of quantitative easing?

On a technical level, the answer has to do with where the money goes. The widespread belief that QE is flooding the economy with money is a myth. Virtually all of the money it creates simply sits in the reserve accounts of banks.

That is the technical answer, but the motive behind it may be something deeper . . . .

An Asset Swap Is Not a Helicopter Drop

As QE is practiced today, the money created on a computer screen never makes it into the real, producing economy. It goes directly into bank reserve accounts, and it stays there.  Except for the small amount of “vault cash” available for withdrawal from commercial banks, bank reserves do not leave the doors of the central bank.  MORE