From the letters page of the Guardian this morning:
In his analysis article (The icebergs are outnumbering the lifeboats, 1 June) Larry Elliott rejects the lifeboat of helicopter money (the injection of new publicly created money into the economy) as likely to cause a flood of imports or hyperinflation. This is only the case if the money is released directly into the hands of consumers. Even then, while there may be increased imports, hyperinflation is very unlikely under the present deflationary conditions. However, as I point out in my forthcoming book Debt or Democracy, if the money is issued into the economy through public expenditure and matched by a subsequent tax take if there are any inflationary pressures, there is a double benefit. The money would provide public services free of debt and then feed through into the wider economy. At present nearly all the new money in the economy is accessed only through borrowing, which feeds boom and bust.
Recognition of the benefit of publicly created money free of debt will relieve the burden of debt on everyone. The illogicality of the current position is that the new public money created through quantitative easing has been used to buy back government debt, yet that debt has not been cancelled. People are still subject to austerity for debt that has been repaid. It needs to be recognised that new money creation and circulation should not only be used by “independent” central banks to periodically feed the faltering banking sector; it is a public resource and its creation and use should be a matter of democratic debate.
Mary Mellor
Emeritus professor, Northumbria University; author, The Future of Money- Central banks printing more money through quantitative easing do not risk hyper-inflation. The US, UK, Japan and recently the EU have printed or plan to print about a staggering £5tn of QE money and yet deflation, not inflation, is still a major economic threat. To encourage activity across the whole economy the UK government should set an example and again have the Bank of England print tens of billions, but this time to pay for a carefully timed and costed, hence non-inflationary, infrastructure programme.
There have already been calls for such an alternative from environmental groups and green business (Letters, 29 November 2014). They detailed how green infrastructure QE could generate jobs in every corner of the UK by building the new low-carbon homes required and by making all the country's existing 30m properties energy efficient. Such an approach would have the additional advantage of freeing up some Treasury funds to be redirected to the country's hard-pressed social infrastructure.
Colin Hines
Convener, Green New Deal group
Good to see Mary Mellor on the same hymn sheet as the Green New Deal group, of which I am a member.
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I just wish the policy makers would take note. Do you envisage a time when they will?
I keep talking to them
Next time tomorrow….
Good luck!
Good effort this afternoon Richard – thanks for participating in the conversation with the 7 Scottish Government officials. My feeling is that they are involved in a range of interesting initiatives but there is no strategic thinking about how to meet the huge challenge of financing the transition to a Green Economy. I was a bit surprised that there have been no conversations with Scotland’s major pension funds (esp the major LGPS Funds such as Strathclyde) to explore what constraints they face in supporting a green transition and what architecture needs to be put in place which would facilitate large scale pension fund investment. I had lower expectations about their engagement with the GIQE proposition but did think pension fund capital might be on their radar screens. Focus now on the politicians……interesting the SNP in the agenda would be valuable especially if that led to some action from their Westminster Parliamentary forces.
Jim
Good to share discussion
Agree, the politicians are key now
And it is absurd that local authority pension funds cannot be invested for real benefit
Best
Richard
The way this money printing works is to distort relative prices to those other than what the market is signalling. That is what is meant by encouraging activity. The idea being either the structure of production and consumption change about, and/or resources which are currently idle start getting used (the holy grail being unemployed or under employed workers). There is no doubt that intervention can have this effect – the reduction of interest rates over the years has been a boom for the housing sector for example. But, two questions have to be asked. How do we know that the changes made to relative prices are overall beneficial? That is, how can planners be sure? Typically they see a change in the area they are focused on, but there are other areas that now get affected. And secondly, what happens when the intervention stops? The market will revert back to the non interventionist state,(afterall, if the market was going to do what the planners wanted then there would be no need to intervene), resulting in snap backs in relative pricing, aka bursting bubbles.
Government intervention will never stop
Can we dicuss on the basis of reality, not the economists fiction that there is some other state even though no one has ever witnessed it?