There's been a lot of comment today on the need for a new round of quantitative easing. Adam Posen and David Blanchflower are calling for it: I have very little doubt it will happen.
But that's not my point in writing this blog. I believe that so high is the risk of another bank collapse soon that the Bank of England has a short term duty to do something much more practical, which is to get the real printing presses rolling very fast to create an awful lot (I mean billions upon billions of it).
Why? Well, as I've explained over the last couple of days I think another bank bail out is likely to be required soon and I don't just mean within eight years, I mean imminently. We have no idea if banks can survive a Greek default (and those that will follow) in which case we have a duty to ensure that money can still change hands.
That is only possible if all those who want cash can have cash.
I know that sounds extreme: I know it sounds like Weimar Germany; I know many don't want to embrace the possibility that we could see a total loss of faith in banks but I'm being realistic. This government, any government, has a duty to ensure that people can lay claim to their own cash and make payments with it. Unless that cash is available on demand at banks that confidence will not be available.
So sure, consider QE.
But print some of the real stuff - and in high denominations - too. It may be vital to keeping this economy moving.
And if it's a false alarm, store it: it will all get used eventually.
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Not really relevant to this thread. But:
“My principles remain the same and the major one that I established back then was that one should start with the highest rates of tax. It may come as a surprise to some that this is not 50% so let me explain.
Some 130,000 people pay over 90%, 330,000 pay over 80%, 1,710,000 pay over 70% and 1,935,000 pay over 60%.”
http://www.mindfulmoney.co.uk/wp/shaun-richards/a-real-debate-is-still-required-on-higher-tax-rates-in-the-uk-as-they-are-to-be-found-in-unexpected-places/
This makes sense. For one, any likely debt can be taken care of with equity, not more debt, and no debt means we are not chasing a fortune in interes payments. Created money is debt-free money.
Of course, I believe something else should happen first, but it never will, namely the nationalisation of the banks. This should prevent the losses going to the state and the profits to the banks. In turn, this would stop the financial sector passing on their losses to the taxpayer.
It makes sense precisely because this is the cash banks can’t make but which will be needed
When you say ‘imminently’ are you talking about the next 6 months or 6 weeks? It’s a bit of a vague term.
Printing money benefits the government and the banks because they get to spend the new money before inflation pushes prices up. Those on fixed incomes like pensioners are hit hardest. Your policy robs the poor and benefits the rich and powerful. Reverse Robin Hood. Not good.
I support QE in limited amount
My proposal is Green QE
Rather different
Google it
Inflarion will only occur if demand exceeds supply. The US has “printed” a ton of money, but it has made little difference. Why? Because the debt is so massive that the new money cannot absorb it. Of course, the US version of QE might have worked far better if they had put the money into the real economy rather than the banks, who have just sat on it or speculated with it to make huge profits.
The government should stop pretending that the economy doesn’t run on debt. It does! For almost every pound in your pocket, someone else has has to go a pound in debt.
If the economy doesn’t grow, it just keeps on contracting, making debt more expensive and creating more misery. Spending on the economy gets things moving! Spending nothing means our economy keeps flatlining.
I think you miss my point, entirely
I agree entirely with the printing of real money. I also understand your point that the government should print real money in the event of the banks going bust (which seems to be a real possibility). I said what I said about the USA on response to what Daithi Delany had said:
a) That QE (both here and the US) mainly just ended up in the banks instead of the real economy and –
b) That the QE and any stimulus that they put into the US economy was not nearly enough because of the massive debt there, my point beng that inflation, in the US in particular, could not rise significantly because of the massive debt and lack of demand. Something bolder and more radical needed to be initiated and that inflation was the least of their problems.
In the case of both here and the US, I argued that, as long as demand did not exceed supply, there should be little worry of inflation.
True, I did ramble on about debt, which wasn’t really relevant to this. I just wanted to show those that are against government spending that, for our monetary supply, and government money, as well as taxation, we are totally reliant under the present monetary system on debt. I also wanted to voice the opinion that high government spending would not necessarily mean high inflation.