The Prime Minister said yesterday that he could not risk sending between £20 billion and £40 billion on boosting the economy, creating jobs, building social housing, repairing our schools or anything else for fear of increasing interest rates.
First of all that's complete nonsense. As Paul Krugman has explained time and again, the interest rate fairy is a myth created by the Austerians to justify their attack on the poor.
Second, he must know what he said was nonsense. The Bank of England could cancel that debt the moment it was created through quantitative easing. Yes, there really is a magic money tree when we have near enough 0% government interest rates, a falling money supply (12% down over the recession) and no change in sight. And QE will never be repaid.
Third, I've explained how to raise this money, here. There are three ways of doing it.
First close the tax gap.
Second, use Green Quantitative Easing .
Third, reform pensions.
There is no excuse for not investing, bar one. Cameron and Clegg want austerity, and for that they should not be forgiven.
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And once again this week Simon Jenkins is in full voice on the same issue, Richard. With (rightly) scathing words for the usual suspects.
By the way, I see our old friend Dave Hartnett has been duly rewarded for his services to big business, and the rich, powerful and ethically challenged with a suitable job in the private sector. No doubt Mervyn King will be following a similar path shortly.
Ps. I’m sure you’ll get on the ‘real’ Question Time before the end of the year 🙂
this is probably a naive question, but if QE works as you suggest why bother doing the other 2 things?
Because they matter
Structural reform is essential
“And QE will never be repaid.”
The only way that QE will not be repaid is if the economy doesn’t grow ever again. Because leaving that amount of liquidity in a strong economy will create a credit bubble that will make the 2007 crash look like a children’s party.
You think the market will buy that many gilts again?
You’re kidding!
Give me full employment and I’ll worry about QE. Until then it’s just theory
I think this has been mentioned before but the £37m current cost of pension tax relief for contributions and dividends should be mitigated by the tax arising on incomes derived from pension payments. If the same savings were invested outside a pension scheme there would be no tax relief for the contribution or dividends but any amount withdrawn would not be taxable. The cost to the Treasury is mostly a timing difference, although clearly some pension income may be taxed at a lower rate than the rate at which relief is given for the contributions.
This argument makes no sense at all
If people saved without relief they would still pay tax on investment income in retirement
The offset is an utterly misleading claim
Mr Murphy
Deficit and debt monetization are illegal under EU treaties. QE was always meant to be a monetary policy tool, not one for credit creation. Barring sone serious treaty amendments, it will have to be withdrawn ove time.
No it won’t
It is EU compliant
Is there updated data re the tax gap work cretade in 2010?