Peter Bofinger’s voucher stimulus is not well reflected

Over at ‘Social Europe’, German former member of the ‘The Five Wise Men‘, Peter Bofinger, mulls about “How to stimulate the economy after the lockdown“.

He believes that “a ‘helicopter money’ stimulus of direct payments to individuals, as in the US, would be neither well targeted nor transformatory in Europe“. Probably because the social security net is way better than in the US and, though he does not explicitly mention it, helicopter money is something of a difficult sell in Germany.

He suggests this stimulus should be well targeted and here he thinks “special attention should be paid to those sectors — hotels, restaurants and the stationary retail trade —hardest hit by the lockdown, alongside many self-employed people: hairdressers, masseurs, artists“.

The US recovery programme transferred $ 1,400 per person directly into their bank accounts, while “in Germany, this model was taken up by the Retailers’ Association, which called for a payment of €500 per citizen.

But on the above-mentioned criteria general government transfers do not score well. The biggest weakness is targeting. Chastened citizens may simply save the money, so the intended consumption effect will fizzle out. But even if the money is consumed, it is far from certain it will arrive where it is most urgently needed“, he says.

He instead suggests a voucher model. This is unfortunately not well thought through. Here is why. Cash is freely fungible, can be spent anywhere and almost at any time and spontaneously. Ask yourself, how many times did you go out without the intention of buying anything and came home with a purchase.

Now enter the voucher system. It should be time-limited, he says and that is important as we later see!

Let’s stick with three sectors he mentions for the sake of simplicity, hairdressers, masseurs, artists. Let’s even add restaurants and hotels. You now have received vouchers form the government for these services. There are many people who do not use the services of hairdressers, masseurs, artists, hotels. Quite a few people have electric hair cutters. Do you know anybody who visits a masseur? Visiting concerts in post-Corona times is also not exactly hot on the agenda of people when the way of transmitting the virus is still not clear and there is still a general anxiety. But you still do have these vouchers which are worth money and that is what Bofinger seems to have forgotten.

His voucher system will open a secondary market where people offer their voucher/s they do not need. That is the offer side. On the other side is the bid side. Remember, the vouchers are time-limited. So obviously a bidder would wait till the last moment of the validity of the voucher he is interested in and place his – low – bid. On Ebay, any social network, FB and what not. This is not what you want. This is anything but straightforward. It is a clumsy system where vouchers need to be printed, shipped to millions of recipients. Expect lost vouchers on the way. Sure, you could do it somehow digitally via the smartphone and be absolutely sure of hacks, fraud and scams.

The US way is sleek, fast, direct, controllable and the government just needs one ordinary thing, a keyboard. BTW, that’s what central banks use.

“Berlin is a dysfunctional city, a ‘failed state.'”

Quelle: Anne Gabriel-Jürgens

Hi, I’m Wolfgang,

Sure remember me at BMW, don’t you? Didn’t work out quite as I envisioned, so I went into gas and stuff, like a blonde hot chick. I came here today to chew gum and kick ass. I’m out of gum.

Anywho, Germany is fucked. I mean FUCKED!

“After almost 16 years of Merkel, Germany is a redevelopment case in many areas: bureaucracy stuck in the fax age, a digitalization backlog, no fast Internet, massive deficiencies in infrastructure and ailing schools are just a few examples of deficits that are shameful for a leading industrialized country.”

“The state claims total control over vaccination and fails miserably – as it always does when it comes to efficiency and speed. Unnecessary numbers of people are dying because of the incompetence of our over-regulated government apparatus.”

I’m not yet done. Just warming up.

“Berlin is now arguably one of the worst-governed capitals in Europe.

Turning a blind eye to crime, allowing squatting and the spread of clan crime – everywhere you look: Berlin is a dysfunctional city, a ‘failed state.'”

(That’s from some German paper to which I won’t link.)

You can not put 16 years of Merkel more plain and distilled into a couple of sentences.

GameStop Hearing Exposes a Sick Business Model Destined to Exacerbate Wealth Inequality

The following is just a tiny snippet from ‘Wall Street on Parade‘ as all posts are copyrighted. Axne is a Congresswoman of Iowa.

Axne: “Right now, what I’m seeing is gambling in the stock market and that’s not a real solution to income inequality and I don’t think we should pretend that it is.

Do read the whole.

The O’Hare hedge

Too good to be missed. Funny excerpt from Matt Levine’s newsletter ‘Money Stuff’.

“I wrote on Friday about “the old trader joke about the ‘O’Hare straddle,’” but I did not know that the term comes from a specific anecdote. From Aaron Brown’s “Financial Risk Management for Dummies”:

A flamboyant and notorious Chicago Mercantile Exchange (CME) pit trader … Darrell Zimmerman, was way over his limit selling S&P 500 put options on Monday, 19 October 1987. His wife, who also worked at the CME, insisted that he hedge the positions.

Instead of reducing his positions, Darrell bought more to double up on his risk. When his wife confronted him and asked him about his hedge, he pulled out two first-class tickets from O’Hare airport in Chicago to Hawaii for a vacation the couple had planned. ‘Here’s my O’Hare hedge,’ he is supposed to have replied, ‘If the market goes back up, we’ll have a great vacation. If it doesn’t, we’ll be in Hawaii where they can’t find us.’

Well, the market didn’t go back up. Both Zimmermans were fired from their jobs. Darrell continued to trade with O’Hare hedges for five more years, before finally losing for good and spending two years in prison for fraud …. Darrell Zimmerman went on to a successful career as a jazz musician and also to be an active participant in Vancouver’s Occupy Wall Street movement, and to run twice (unsuccessfully) for mayor of Vancouver.

I hope those Occupiers knew what a Wall Street legend they had in their midst.”

The Bundesverfassungsgericht is a mostly toothless body …

Remembering their decision of May 2020 about the unsatisfactory “principle of proportionality” (which created in some quarters an uproar) of the Public Sector Purchase Programme (PSPP) of the European Central Bank (ECB) this paragraph puts it, and the whole body of that institution, into perspective:

The Bundesverfassungsgericht is a mostly toothless body, as its studiously suspended judgments indicate. Best known for meekly overturning Germany’s Basic Law to allow Schröder and Merkel in 2005 to stage an unconstitutional election before polls were due, it takes care to avoid serious offence to the Obrigkeiten of the day. Berlin and Frankfurt are unlikely to have much difficulty sending Karlsruhe back to sleep.

Ever Closer Union? – Perry Anderson