Last summer the likes of Chris Giles on the FT were keen to point out that the policy of People's Quantitative Easing that Jeremy Corbyn had then borrowed from me was a policy not for 2015 but for the time when there might be a new financial downturn.
And I agreed with him.
And I pointed out that it was the job of any opposition to point out what government policy might lead to and how they would deal with the consequences in government.
Now it seems like we have the next global financial downturn (at least, it may not be a crisis, as yet) on its way. So let me make three points.
The first is that Jeremy Corbyn needs to be talking People's Quantitative Easing again: the process where a National Investment Bank issues debt to fund infrastructure investment with the intention of creating employment to stimulate demand and keep inflation in positive territory whilst at the same time meeting the needs of future generations by creating useful assets, all with the intention of exploiting the exceptionally low interest rates that markets now offer with the Government being willing to act as underwriter of any such issue if the market is not willing or able to fund it to the level required to ensure macro-economic capacity in the economy is used to best effect.
Second, George Osborne needs to be building PQE into his economic planning (I did not write PQE for Labour).
Third, the EU needs to be doing the same.
Right now there are three words the world needs to know and they are People's Quantitative Easing. They're where our economic hope lies.
And the likes of Chris Giles should be saying so.
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Richard
Would you not say that the ECB are doing PQE? They are buying bonds in the European Investment Bank as part of their QE programme.
Close
But not quite yet the real thing
But a useful step on the way
Looks like it is Deutsche Bank’s turn to lead a very wobbly pack of financial cards today, as confidence in all the big banks hits the headlines again!
http://www.theguardian.com/business/2016/feb/09/shares-dive-as-fears-mount-for-health-of-global-banking
Considering that:
“Deutsche has a huge exposure to the derivatives market, and it’s impossible, and then we mean LITERALLY impossible for any government to bail out Deutsche Bank should things go terribly wrong. Keep in mind the exposure of Deutsche Bank to its derivatives portfolio is a stunning 55T EUR, which is almost 20 times (yes, twenty times) the GDP of Germany and roughly 5 times the GDP of the entire Eurozone! And to put things in perspective, the TOTAL government debt of the US government is less than 1/3rd of Deutsche Bank’s exposure.”
http://www.theautomaticearth.com/2016/02/debt-rattle-february-8-2016/
wobbly seems a somewhat over positive term given this context. And looking down at some of the other articles on that link Deutsche are not the only bank staring into the abyss.
Investment tip of the day: Invest in shovels for all the shit that’s about to descend upon us.
Richard, please can you explain the difference between PQE described above and the government doing the same investment through increasing the fiscal deficit. I am sure you have done it elsewhere, but I’m a bit slow.
Thanks
See this http://www.taxresearch.org.uk/Blog/2015/03/12/how-green-infrastructure-quantitative-easing-would-work/
There is certainly plenty to spend it on. I have been skeptical for some time about a “Uk lights out” situation but this is now in prospect in the next 3 to 5 years for the simple reason that new power stations are not being built to replace old ones that are closing. The current market “players” (an excellent word to describe the “big six”) don’t feel like building new ones and current UK gov’ energy non-policy ensures they don’t. BTW: the forecast is for 70m people in the UK by 2030. People use power – so as a minimum more power generation will be needed.
A national investment bank is a public bank, motivated to lend for the public benefit, unlike private banks, motivated to lend to maximise profits.
Local public banks, like the Sparkasse in Germany, also prove to be an excellent way to create money for the real economy as they lend over 70% of their loans into the SME sector, unlike the British private banks, who lend only 2%. SME’s (under 250 employees) have been proven to provide more employment, innovation and tax per pound invested than larger companies.They have local knowledge and go by the business plan, not collateral and provide real financial independence to the regions. They don’t do financial speculation and so do not crash but nurse their SMEs through bad times, providing the patient money so desperately needed.
They are 25% of banking worldwide and 40% of banking in Germany (which has a very diversified banking sector) but are never talked about as an alternative to the 5 massive private profit-obsessed banks in the UK.
To alleviate this, there are international experts on this type of banking, public banking – banking for the public interest, speaking at a conference in Manchester on Saturday Feb 20th, but with very few tickets sold. However, John McDonnell is meeting with one of the premier thinkers in this area, Ellen Brown, as she travels through London.
Richard, with your writings of all the wrongdoings of private banks, and a proponent of money being created to help the real economy, you are supporting public banking even if not labelling itself as such.
Are you familiar with the writings of Ellen Brown and Professor Richard Werner? You would find you would chime with them very well and it is so rare to be able to hear them speak. They often refer to each others work but have never managed to meet before and it’s happening in Manchester on Feb 20th and nobody is taking notice!!! Probably because I am not a marketing professional or an organisation. This conference has been put together by myself and a colleague and it looks like it will experience substantial financial loss. Please can people do what they can to spread the word
Details of the conference https://www.eventbrite.co.uk/e/public-banking-banking-in-the-public-interest-tickets-20773078838?aff=ebrowse
i can’t be in Manchester that weekend
I have met Richard
I know of Ellen Brown
I support public banking: let me be explicit
I think the UK would benefit from regional banks
Did you see this from one of your City Uni colleagues? http://www.ft.com/cms/s/0/9f20fed8-ce8f-11e5-831d-09f7778e7377.html#axzz3zl7IlqB7
The reference is to Helucopter Money
Hi Richard,
Ticket sales for the public banking event are really low, is there any way that you can mention the gathering of such great minds in the next week on your blog??
I have been attending so many activist events on northern devolution to mention the idea of local banking in the Q&A session but it is just never on the table to even be discussed, which is very frustrating.
There are so many changes needed in the financial sector and the nature of banking is certainly one of them. It will be such a shame if this event is very poorly attended as there could be so much to learn, especially as it needs to be an option after the upcoming financial crash and a national infrastructure bank is needed for PQE anyhow.
Kindest regards
Have you sent me a link?
Richard