I have been asked to provide an explanation of how Green Infrastructure Quantitative Easing would work as a result of the speech I made this morning to the Convention of Scottish Local Authorities. This is a summary:
Green Infrastructure Quantitative Easingi
The UK has an economic problem
In 2015 the UK is facing indisputable economic difficulties, including a below expectation tax take, the threat of a rising deficit and the spectre of deflation. That suggests that the time for a change of direction has arrived. Chancellor George Osborne should then, in his final budget of this parliament, introduce a new quantitative easing (QE) programme for this country, but with a difference.
Investment is the answer
What is needed now is a QE programme that would stimulate the economy, boost employment and tackle climate change. This could be achieved if QE funding was used to fund essential infrastructure improvements across the UK. That could increase employment, create new business opportunities, broaden the tax base and, most importantly, create the infrastructure that could be the basis for future prosperity in the UK that the government, most political parties, the private sector and trade unions all recognise that we now need.
Nothing but government investment can turn the UK economy around given that private investment is falling at present, consumers are cautious about borrowing to spend and real wages have still, for most people, not reached their 2008 levels. At the same time EU and other overseas markets look very unlikely to give the export boost that is the only other way to kick start economic activity in this country.
What has been missing to date is the mechanism to fund this essential new government investment, and Infrastructure QE provides this.
What Infrastructure QE is, and how it works
All QE works by the Bank of England buying debt issued by the government or other bodies using money that it, quite literally, creates out of thin air.
There is nothing very odd about this money creation process that the Bank of England would use. All money, barring notes and coins, is created by banks (including all those familiar names on the High Street) when they make loans. The process is very simple. When you ask for a loan from a bank you do not get given somebody else's money, although that is the common understanding of the process. Instead the bank simply creates two accounts for you. One is a current account into which they put the money you want to spend, and the other is a loan account, which is the amount that you owe back to them.
The important point to note is that there was no money in either account before you asked for the loan, and if you immediately repaid it after the loan was granted, then there would be no new money either because both accounts would be cancelled. It's the fact that people believe that they can spend the money in the current account that's been created by the loan that, quite literally, means that banks can creates money out of thin air.
Between 2009 and 2012 the Bank of England used this exact mechanism to lend money to one of its own subsidiary companies (Bank of England Asset Purchase Facility Fund Limited which was, of course, eventually owned by the government) to buy back government debt to the tune of £375 billion. The purpose was solely to provide new money for use in the banking system at a time when the banks themselves were suffering reduced demand for loans that would have created the cash we needed to keep the economy going.
There was, however, one enormous side-effect of this whole process. That side effect was that the £375 billion of debt in question was effectively cancelled
The government no longer pays interest on this £375 billion of its borrowing, because to do so would mean that it would simply be paying interest to itself since the government gilts now belong to the Bank of England, which is in turn owned by the Government. That's one clear indication that the debt no longer existed, because if it did the interest would have been due. And that is quite obviously true: whilst one part of government can obviously owe money to another part, if no one outside government is due money as a result there can be no government debt owing, and that has been the consequence of QE.
What we are suggesting now is that this programme be extended and that a new QE programme of up to £50 billion a year be created during the first years of the new parliament to provide the funding to build the infrastructure that will be our legacy to our children.
We suggest that this new programme should buy the new debt that will be issued in the form of bonds by the Green Investment Bank to fund sustainable energy, local authorities to pay for new houses, NHS trusts to build new hospitals and education authorities to build schools. This QE programme could do this just as readily as the previous programme bought central government bonds. And the result would be, in exactly the same way as government bonds were effectively cancelled by the previous QE programme the moment that they were bought by the Bank of England, that these new bonds would also effectively be cancelled as each of the bodies issuing them is part of government, and the government cannot owe itself money, as previously noted.
What would be funded?
We have already suggested some of the government and related organisations that could be funded using the Infrastructure QE programme, but we are particularly keen that the programme be used to make every building in the UK energy efficient, and, where feasible, fitted with solar panels, which would reduce energy bills and in the process tackle fuel poverty and cut greenhouse gas emissions.
The scope of this energy efficiency initiative would be huge, given that there are around 28 million dwellings and 2 million commercial and public sector buildings in the UK.ii It has been estimated that nearly £500bn of investment in new low-carbon infrastructure is required over the next 10 years, of which £230bn will be required for energy efficiency alone.iii A ‘Green Infrastructure QE' programme might therefore fund £50 billion a year of investment over the next ten years unless the economy booms and other sources of funding become available.
Such an approach is, we stress, technically feasible in banking terms. Mark Carney, the Governor of the Bank of England, is on record as saying that if the government requested it then the next round of QE could be used to buy assets other than government debt.iv Indeed the Bank of England has itself said it is looking at taking on a more proactive role in tackling environmental problems. Last month it announced its new One Bank Research agenda that it would for example examine ‘what role, if any, do central banks have in addressing systemic environmental risks?' v
All this can be done debt free
We reiterate: this whole process can be undertaken without creating new debt that will have to be repaid in future. It is instead paid for by creating new money, which is a total different process.
What we also stress is that this money creation process used is not unusual, artificial, or even novel: it is what happens every single time a bank makes a loan. All that is unusual is that we are suggesting that the funds created by the Bank of England using this process be used to buy back debt that is due by the government in one of its many forms, meaning that it is effectively cancelled.
And we also stress that this process has already been proven to work: £375 billion of debt has already been cancelled in this way.
But what about inflation?
We stress, this whole programme can only be undertaken until such time as either the UK economy is functioning at full capacity, or there is genuine full employment or there is real risk of significant wage inflation. Until these conditions exist the government can issue debt without risk of inflation despite the fact that all QE programmes print new money.
That money creation is their purpose. But that money creation is necessary at a time when the economy is under-performing because when there is a shortage of demand, or exports, or private investment in the economy (and each of these is true right now) then there is also a shortage of demand for bank borrowing, and since almost all money that we need to keep the economy going round is created by bank borrowing, too little money creation can actually create a self-fulfilling recessionary environment unless the government steps in to correct it, which is what QE does. The purpose of QE is to break that recessionary cycle by creating new money, but from the government instead of private banks. If the private banks were doing their job in creating money then we would not need QE. The fact is that they are not, and that's why QE is essential.
In this context the fact that QE money is never cancelled, unlike the money issued by private banks, which is cancelled when loans are repaid, is also important. We need to keep QE money in the economy to ensure there is sufficient money for the economy to work. The fact that it does not need to be repaid has been confirmed by Adair Turner, the former Chairman of the Financial Services Authority has made clear that in his view money should be created this way, and not repaid.vi
That said, we accept that if such a program continued when the economy had recovered then it could be inflationary. This cannot be denied, but at present we do not have inflation in the economy. Indeed, the risk is that because of falling oil prices and a continuing lack of any sign of real wage increases, there may be deflation in the UK economy, which is a much greater risk than inflation. So, we make very clear that we do not think that QE can be used forever for the purpose funding investment in infrastructure, but it can be so long as there is little or no real growth in the economy, and there is no risk of current inflation.
What's the difference between this QE programme and the last one?
The QE program that was put in place between 2009 in 2012 had just one central purpose, which was to refinance provide the City of London and its banks. By and large it succeeded. Bankers bonuses continued as a result, banks were refinanced, and the money was used to boost their balance sheet by inflating house prices, the stock market and many asset prices. That was, whether the government admits it or not, the purpose of the exercise. £6,000 of money was created for every person in the UK and was largely spent on keeping our banks in business.
What we are suggesting is a smaller programme of less than £1,000 per person in the UK a year to kickstart the UK economy by investing in all those things that we would wish our children to inherit whilst creating the opportunities for everyone in every city, town, village and hamlet in the UK to undertake meaningful and appropriately paid work.
A recent IMF report ‘The Time Is Right for an Infrastructure Push'vii made the case that more public infrastructure investment is critical at present, not just in the UK, but in many countries. It made clear that its impact is strongest when there is economic slack and that, when done correctly, ‘the boost to output offsets the debt taken'. We would argue that if QE is used to fund the investment there is no debt at all, but that there will be a boost is undeniable.
This variant of the Bank of England's original Quantitative Easing programme should kick-start the essential transition to a revitalised and greener UK economy. It could, in turn, provide enough tax revenue to enable the Government to spend more public money on other activities, as well as providing the confidence needed to unlock additional private funding from pension and insurance companies through to individual savers. Taken together, these would provide the scale of long term investment required.
But perhaps most important of all, this could create jobs in every single constituency of the United Kingdom which is why we think it should be a political imperative for all parties in the run up to next May's election.
__________________
Technical note: how Green Infrastructure QE (GIQE) would work
GIQE always starts with debt. It may be debt issued by local authorities, or NHS trusts to replace PFI, or the Green Investment Bank, or whoever, but all will be within the state sector. Never once will there be GIQE without debt, or it would not be QE.
And that debt would, because of the requirements of the EU Lisbon Treaty, be issued to private sector banks in the first instance: that is what the law requires.
However, under a GIQE programme government would require that the Bank of England (BoE) make funding available to purchase such debt almost immediately after its issue to private banks.
It is stressed, this would not be a matter within the gift of the BoE; it would be mandated to act in this way by law. The BoE is not an agency above and beyond the law; it is just a wholly owed company controlled by the government. It can be required to do whatever the government demands and is an agency of the state just as, for example, an NHS trust is. We may like to pretend both are quasi independent bodies right now, but that's just a charade of choice that can be stripped away if it is convenient to do so.
As a result BoE will acquire the debt issued by local authorities and others (in practice through a special purpose subsidiary created for the purpose) from the commercial banks who first bought it, which banks may, it must be said, have been its owners for a very short time. In effect they may have had them only on underwriting account. And once the debt is owned by the BoE the effective result will be that a government owned agency (the local authority etc.) will have issued debt that will be by now be wholly owned by another government authority with the money for that acquisition by the BoE special purpose vehicle used for this purpose having been created out of thin air.
But what that then means is that if the debt has, in effect, been acquired costlessly (and it will have been, because the money used to buy it, which, of course, is a sum almost exactly equivalent to the original value of the bond, was created by the BoE out of thin air) then to charge interest on it makes no sense because there was no cost to creation of that money and no debt to be serviced to pay for the cost of acquisition. This is why this arrangement is different from loans to local authorities and the like from the Public Works Loans Board, which in effect makes gilt finance available to local authorities. So, the debt interest on the loan can be waived as a result (as, it is stressed, it has been on QE gilts now) the debt instrument in the state owned authority (NHS, local authority, Green Investment Bank, etc.) takes on a wholly different, and much more exacting role because it then becomes what is, in effect, hybrid equity that appears to be issued as debt but actually behaves entirely like share capital in a private enterprise. In other words, the GIQE funds become risk bearing capital (although technically remaining as debt) to fund the types of growth we really need in the economy.
And because this debt can, like all debt that behaves like equity, have conditions attached to it, then the BoE subsidiary that owns it can also assign the right to manage that debt to a relevant government department if it was empowered to do so, meaning that the effective equity stake that GIQE could create could be brought wholly and completely under accountable control through something akin to an equity loan arrangement or the effective grant of a proxy for some aspects of management of the quasi equity interest, both of which arrangements are well known and understood corporate finance.
What it is important to say as a result is that the BoE would not control the investments, it would merely act as an intermediary.
And the investments would be under democratic control, which is key to the political acceptability of this whole arrangement.
_________________
Notes
[i] The term ‘Green Quantitative Easing' was first explicitly used in 2010 in http://www.financeforthefuture.com/GreenQuEasing.pdf This concept of directing quantitative easing to fund the greening of the UK's infrastructure was included in the Green New Deal Group's 2013 report ‘A National Plan for the UK' http://www.greennewdealgroup.org/wp-content/uploads/2013/09/Green-New-Deal-5th-Anniversary.pdf and in the new economic foundation's 2013 report ‘Strategic quantitative easing' http://b.3cdn.net/nefoundation/e79789e1e31f261e95_ypm6b49z7.pdf
[ii] http://www.ons.gov.uk/ons/dcp171766_373513.pdf
[iv] ‘Mark Carney boosts green investment hopes' Financial Times, March 18th, 2014
http://www.ft.com/cms/s/0/812f3388-aeaf-11e3-8e41-00144feab7de.html#axzz30ATJUiZ2
[v] http://ftalphaville.ft.com/2015/02/25/2120315/should-central-banks-adopt-a-green-agenda/?Authorised=false; http://www.bankofengland.co.uk/research/Documents/onebank/discussion.pdf
[vi] http://www.ft.com/cms/s/0/8e3ec518-68cf-11e4-9eeb-00144feabdc0.html#ixzz3IjZNT6bq
[vii] http://www.imf.org/external/pubs/ft/survey/so/2014/res093014a.htm
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Hopefully, they will do more than just discuss it and actually implement it. There should be no reason for a sovereign nation to go into debt to private banks when it can simply create the money itself.
The North Dakota bank model, where all tax monies are deposited into the bank by law and used as collateral for loans is well worth exploring too; a bank that provides money and finance for the state rather than for shareholders.
Thanks Richard.
As always a detailed and easily understood explanation, which I for one really appreciate.
And if you put the idea of not charging interest on QE capital together with using a minority of the capital to buy out PFI projects, you get a large cost saving for the NHS (among others), an ever-increasing proportion of whose budget is currently going into PFI schemes. Though buy-outs don’t stimulate the economy in the same way as new investment, so this is not the main idea.
I think there should be a commitment to continuing this programme for at least 10 years, though the method of funding would change when there is a danger of further QE leading to inflation. Other funding sources – you mentioned pension contributions in the earlier blog – would need to be paid some rate of return; the aim could be for moderate but reliable returns, perhaps explicitly linked to inflation. Another source could be higher tax receipts when the economy is more buoyant.
The reason for long-term commitment is that it seems to be very difficult to get out of an economic slump. Wasn’t the Great Depression only fully shaken off by World War II?
Still lala land re jobs, cruel empty promises while the fact that jobs created means, under the current systems, people come into the country for them.
‘..creating the opportunities for everyone in every city, town, village and hamlet in the UK to undertake meaningful and appropriately paid work.
– my arse.
Are you implying that any attempt to boost employment is futile, because there will be 1 additional immigrant for every 1 additional job? I can believe there would be some extra immigration, but it seems implausible that it would be 1-for-1.
And in this case, it does not have to be a race to the bottom, because the Government can choose how to create the new jobs. For instance, it could decide that they will all pay the living wage.
The programme is also not directly competitive will other countries, in the sense that it aims at improving infrastructure in the UK; which doesn’t prevent other countries from improving their own infrastructure. If all europe did the same thing, jobs would be created in all countries, so there would be no obvious effect on net migration. Of course, if only the UK does it, jobs will only be created here, and some net migration might be expected.
However, even jobs taken by migrants would benefit the UK. Our infrastructure would be improved. They’d pay UK taxes. They’d spend money here. And so on.
Thanks Phil
‘it seems implausible that it would be 1-for-1’
You are so far from reality.
The Office of National Statistics has several times tried to wake people ups with figures that show 70-80% of new jobs go to migrants.
‘Govt will decide that all these jobs will pay the living wage’?
a) it wont
b) it would not be policed and there will always be people to undercut, primarily people for whom even the basic wage here is many times higher than at home
c)if the govt did have the will to do so, would be an even bigger pull for labour from outside
‘If all europe did the same thing…there would be no obvious effect on net migration’
Firstly yeah right if if if, just like climate change action.
But there would still be net migration, even if other countries were doing it because wages are higher here – the same socio economic difference that draws people here now.
And much more so if only the UK has this program, see above.
You last sentence doesn’t support the argument of creating jobs for people here, so Ill ignore.
Lets get this straight. I would love the sort of climate change economic systemic switch that is being proposed. I am a grandmother.
But I want it to be realistic and take account what people everywhere in pubs etc know but so many holier-than-thou green/left people dont want face up to. I want it to be practical so it can actually work, be a reality, not just make some people look good, get elected etc. Without facing up, this is all it is at the moment.
Moreover, to fail to face up to these issues is to support the main, most powerful, best-funded lobby for open borders and the undermining of democracy – the City of London
WAKE UP
Linda
Although you like to hurl abuse in my direction I think few think I have not woken up
You really do not help your case
Richard
Linda-I have a lot of time for your concerns and have read what you write and listened to interviews- but serving up the sort of rebarbative stuff above without trying to explain where you are coming from does you a great disservice and hardly helps you get your message accross. There are serious issues about labour migration pulling wages down which plays into the hands of globalisation and the nature of free trade-LETS DISCUSS THEN PROPERLY.
They never are discussed, because this shroud of ‘mustn’t speak about this’ is put over it straightaway, as with your negativity here.
Why do I have to ‘explain where I am coming from’, in stating the obvious?
None of our resistance will get anywhere with this failure to address what is a central neoliberal strategy – structures that facilitate unlimited cheap labour, written into law.
Linda
What you ight think is obvious is not to others and your tone simply fails to make your case
I wish you could pitch in a way that would make it easier for you to be heard
Richard
If you don’t know, there is currently a tax differential for employing workers from overseas – FAVOURING employing workers from overseas.
From the GATS agreement in the Uruaguay Round (so from 1996) we have a commitment on Mode 4 Intracorporate Transferees, without any numerical limit – so Mode 4 ICTs are now the biggest group of Temporary workers in Tier system.
These are workers who (theoretically anyway) work for a company that is established here and overseas and are brought across within the firm. They are skilled (the EU specifies ‘skilled ie grad equiv’ for Mode 4 entry)though nothing like as skilled as the category was supposedly to be about – managers etc. Much used by financial services firms established here and in India.
ICTs are typically paid at low industry rates, which can be the minimum wage (was lower than the minimum wage till questions were asked in Parliament) made up to a low industry norm with TAX FREE ‘EXPENSES’. So – cheap for everyone – except displaced UK workers here nb the slump in IT Higher Ed computer training here and other countries eg Aus, which has very large numbers of Indian workers coming in on a similar basis.
So the tax system is discriminating in favour of using foreign workers (they can then be let out to other companies too, once here) -AND NO ONE ON THE LEFT BLINKS AN EYE. Because they have their eyes shut to such things anyway.
Linda
There is a tax differential against all work – it is called NIC
That’s a real issue
Now give me stats to support your case
Data with sources please
Richard
There is plenty out there on (temporarily transferred) migrant workers and the tax and NI breaks.
e.g. parliamentary questions on the cost to the state of the NI exemption and the anomaly that they also have free access to the NHS but are exempted from NI:
http://www.theyworkforyou.com/wrans/?id=2014-01-08b.180958.h
http://www.theyworkforyou.com/wrans/?id=2012-03-22a.193.0
To quote a 2013 NIESR report:
“the cost of employing migrants was roughly the same or in some cases slightly lower. One firm went on to add that this lower cost was due to the fact that they didn’t have to pay National Insurance costs for the first two years of employing a migrant in the UK.”
http://niesr.ac.uk/publications/migration-and-productivity-employers%E2%80%99-practices-public-attitudes-and-statistical#.VQaqiI1ybX4
And from a 2009 Migration Advisory Committee report that mentions the tax free allowances open to migrants staying for less than 2 years:
“We were also told that, currently, an employer can issue a three-year certificate of sponsorship while the employee simultaneously tells HMRC that he or she is coming to work in the UK for under two years. We understand that it is common for immigrants in receipt of allowances to claim that they intend to stay in the UK for one year and 364 days.”
https://www.gov.uk/government/publications/analysis-of-the-points-based-system-tier-2-and-dependants
Reading those answers suggests we are looking at a very minor issue covering fewer than 30,000 people
I think the domicile rule vastly more significant in that case
Read quickly – not entirely convinced. Part of the rationale for QE (beyond the immediate debt balance) is the effect it is supposed to have on other participants in the market. As this would be a new type of instrument there is no market per se and it is harder to anticipate the secondary effects.
As before it reads more like fiscal spending (which may not be a bad thing atm).
The impact of QE was solely on financial institutions
What was trhe secondary effect?
Secondary effect: the fact that “financial institutions” will then have looked for alternative investments which will have boosted investment somewhat. And I’m not saying that was a POWERFUL effect. Ever since QE was first mooted, I’ve regarded it as a weak and unsatisfactory form of stimulus. But it’s better than nothing.
The aim was to deliver money to financial institutions
Anything else was secondary
It is like fiscal spending, except without the cost of debt, and focused on investment.
There would be secondary effects, but not of the kind that the old QE was alleged to have. In this case, the secondary effects would be that people with proper jobs would spend more money and pay more taxes; and (hopefully) that this would eventually stimulate more private sector investment.
Indeed
A few problems with the above article.
First, as I’ve pointed out a trillion times over the last few years, investment is a poor way of dealing with recessions. Reason is that it often takes YEARS to get investment projects going, by which time the recession is over, and all you do is stoke the next boom.
Second: “Nothing but government investment can turn the UK economy around given that private investment is falling at present…”. There is absolutely no reason to think that because private investment has fallen, that therefor public investment suddenly becomes more viable.
Plus it is untrue to say that “nothing but government investment can turn the UK economy around..”. Demand can perfectly well be raised by stimulating CONSUMER spending (which in turn will result in some increase in both public and private investment spending).
However, despite the fact that the BASIC PURPOSE of the economy is to provide what consumers want, I realised long ago that politicians and other self appointed experts are averse to putting money into the pockets of the plebs.
Third, I don’t see the point of the Green Investment Bank. Why not just do what Positive Money and others have advocated for several years now, which is to have the state create new money and spend it on whatever (investment or consumption spending) in sufficient quantities to bring full employment?
As a matter of fact private sector investment has fallen
Second some green investment could be very quick
Third a consumer boom sucks in imports
So you’re just wrong
And I am afraid positive money have simply got money wrong
Can you explain why you think Positive Money have got money wrong?
Money is debt
You can’t just print it
I also think there is a positive role for private banks in the process
I see no reason to take them out of it
Now I really am confused! Isn’t QE a “money printing” process (not literally printed but still created)?…..and doesn’t it result in practice in the de facto cancellation of debt which the created money is used to purchase from private banks?
I don’t think Positive Money advocate the abolition of private banks….they just advocate removing their capacity to create money as debt. My understanding of their ideas is that private banks would have a role in allocation of the money supply which would be created by the BoE…..in the PM model they would be acting as intermediaries between the BoE and the real economy I think.
Jim
The Deb is not cancelled for monetary purposes in QE. It continues as money, but zero interest money
Positive money is suggesting two wholly new types of banking that abolish money creation
The trouble is they have no answer for the fact debt will still be traded, which it will be without doubt
Banking needs reform, but not abolition as it is, which is anyway an impossible task
Future energy generation [1] would seem to greatly benefit from Green QE. A case in point is Tidal Lagoon power generation. Several schemes have been proposed and costed [2]. Cost of power from tidal lagoons has been assessed by Poyry [3] and they indicate a required return on capital of 6.4% (pre-tax, real). Tidal lagoon development is being actively pursued by Tidal Lagoon Power Limited [4] and might follow such a return. The Green Party and others support tidal lagoons in principle.
My concern is that the financial model has to be *appropriate* to give a return to the community, not create wealth by long-term rents over 40 to 100 years. Is a financial model based on partial Hedge Fund capital the right way to go? I do not think so.
Richard: Green QE would be ideal, but if one has to use long term private capital what would be an appropriate return on capital for a public/private venture? The Barclay Hedge Fund average over the last five years is c. 3.78% bracket (not sure if this is pre-or post tax).
The correct financial model for power generation is absolutely crucial to answer before the we should support such ventures!
Some other comments on future energy generation.
– Financial model: what is the best mixture of funding — private, local community, regional, Govt, Green QE.
– As part of a National Strategy, not piecemeal.
– Who will pay for future environmental issues and decommissioning (look at the mess in the nuclear industry).
– What will be a fair pricing policy to account for inflation etc.
– Effect of Govt subsidy or tax relief.
– Ethical ownership, fair pay, work contracts and tax.
All of the above should be democratically decided by the community and their experts to counter the army of professionals who represent the causes of Capital.
[1] For example see: http://energy.gov/eere/renewables
[2] Review of seven UK tidal energy case studies. http://research-repository.st-andrews.ac.uk/handle/10023/2215
[3] http://tidallagoon.opendebate.co.uk/files/TidalLagoon/tidallagoonpower_levelisedcoststudy_v7_0.pdf
[4] http://www.tidallagoonpower.com/storage/documents/The-Economic-Case-for-a-Tidal-Lagoon-Industry-in-the-UK_final.pdf
All accepted
But estimating equity returns is different from fixed interest returns
I fully agree with you Richard that such a scheme should be tried. The need for the funds to be processed via the private banks and sold to an operating company of BoE – almost immediately – may allow the City to take a slice at this point but no doubt this could be negotiated.
Could the BoE purchase assets held by pension funds as part of a Green QE programme…in particular UK gilts……as well as purchasing them from banks? Would this assist in directing pension fund investment towards green infrastructure, allowing them to generate cash for reinvestment without depressing asset prices through a big sell off?
The gilt programme has happened
I do not suggest repetition now
I think you need to go into more detail about risk outcomes
. Like any scheme that looks to make money from mispricing risk everything appears rosy as long as the risks are ignored. In this case there’s a BoE SPV with assets equivalent to ‘risk bearing equity capital’ in infrastructure projects and cash liabilities.
What occurs when some of those projects fail or lose equity value? I can’t tell whether you’re suggesting that we carry on with the SPV having more liabilities than assets, because green QE makes balance sheet solvency obsolete, or whether there would be an explicit channel of shortfall funding from the Treasury. The latter amounts to simply transferring the mispriced risk onto taxpayers, which seems like the kind of thing not to sweep under the carpet.
You miss the point
Green QE creates money, which the economy can and does need
The money creation is independent of the outcome of the projects. Of course I want them to succeed, but the BoE won’t be accoutning for them because the equity will never be repaid
That will be the job of the GIB, local authority etc
And yes there is risk to them – but again, only to the extent that the equity is lost. That os why equity investment is key
I suggest you focus on substance rather than ‘pitch’
I speak as an East End working class woman.
Sorry Linda
Class is not the issue
I am well aware of my own family history but it has never qualified me to say or do anything
It is you who is pitching in that case
And it’s why time and again you miss
Why do you avoid what is the issue, time and time again,
with tangents about ‘pitch’, ‘class’ and anything else you can create fog with?
Answer the question
Give me data
Persuade me
Over to you to prove your case
I’m ducking nothing
Just give me evidence
Linda-you seem to be using this blog to have a go at Richard who, I’m sure, is more that happy to let you get your message across. You are an educator yourself, and many of us come to this blog to learn-so please try to be educative rather than simply ‘having a go.’
You have interesting things to say-so why not say them?????
I’m v busy on other things – on the Deregulation Bill(which you need to be aware of re tax), on TTIP and international trade deals, on the PFI rip-offs, to be doing your research – I’ve given you the leads.
I’m just trying to get you to think before writing the same subverting, Guardian-style, idealistic/one-eyed crap over and over (if you indeed want to).
Tell me what exactly are you asking for, and I will try to provide it, if it doesn’t take too long.
Linda
The request was very simple
How many people are being employed on reduced tax rates at what cost to the UK?
That’s data that changes things
Your invective does not
Richard
I imagine that Linda’s frustration is with the way the left will not look at the free trade/migration of workers issue due ti it’s fear of appearing anti-immigration and the internationalist outlook of traditional socialism which has inadvertently played itself into the hands of global capital movement under the specious reasoning that ‘capitalism always spreads wealth.
Economist John Weelks (The Economics of the 1%) looks at this issue of how the left don’t seem to challenge free trade and attack ‘protectionism’ citing Greenpeace’s concern over GMO’s alongside their acceptance of unrestricted global trade.
He makes the point about Free Trade as follows:
“the logic required to reach the conclusion that free trade improves human welfare is so restrictive that it should generate laughter in any intelligent person…[as it requires] the metaphysical follies necessary to construct the fantasy of ‘perfect competition’ as well as other idiocies such as:1) Continuous full employment of all resources. 2) all countries could produce all traded commodities (grow bananas in Norway, herd reindeer in Somalia) 3) the consumption patter of all countries is the same 4) every country uses the same technology to produce each commodity.”
I suspect that Linda is saying that many on the left are middle-class, who have a cosy, sentimentalist, view of international trade unsuspectingly supporting the neo-lib/rentier project. I think Linda has good points to make but seems to create her own ‘fog’ of belligerence instead.
You are right
Very clearly the model of international trade is nonsense
But in my experience change is dependent on evidence and a solution being available
That is what I am, reasonably asking for
Saying there may be a problem is not enough, I know, from experience