This is a headline in the Telegraph this morning:
You did read that correctly: that is in the Telegraph. And Ambrose Evans-Pritchard means it. He writes:
There are many good reasons to gasp at Jeremy's Corbyn's planned assault on capital, but his enthusiasm for "People's QE" is not one of them.
Overt monetary financing of deficits - the technical term - is exactly what the world will need if the global economy tips into another recession with interest rates already at zero and debt ratios stretched to historic extremes.
And as he adds:
Governments that do not have such a contingency plan in place to combat a potential deflationary shock from East Asia should be hauled before their respective parliaments to account for their complacency.
Which is precisely why I have been making the case for People's QE (as it is now called, but which was once green quantitative easing) for some time. A responsible Opposition has to raise such planning as an alternative to the proposal of the government if that is likely to fail.
As the Telegraph also notes:
HSBC's chief economist, Stephen King, argues such drastic measures may be our last resort in a "Titanic" world with few lifeboats left, if anything goes wrong. He is not alone in the City of London.
And as Pritchard-Evans then says:
The European Central Bank is dipping its toe in these waters right now. It is quietly buying the bonds of the European Investment Bank, an EU public body that chiefly finances infrastructure. While the ECB may not care to admit it - for fear of fresh lawsuits at the German constitutional court - it is in effect "printing" money to pay for fiscal stimulus.
The scale is small, but the principle is much the same as Mr Corbyn's plans to harness QE from the Bank of England to fund a British "National Investment Bank".
There does then follow some more typical Telegraph argument to keep the readers happy, but the article concludes saying:
But he [Corbyn] is right that investment levels in Britain are woefully low by the standards of OECD peers, an underlying cause of our chronic account deficit, now the worst in the developed world at 6pc of GDP.
If the private sector will not rise to the challenge, it is up to the state to take on the responsibility, a duty advocated by none other than Adam Smith.
And his instincts on monetary policy are essentially correct. QE as we know it is dead. It is an urgent national imperative to craft a radically new form before the next crisis hits.
It was a quarter in which I did not expect to find such strong support. But I am pleased to note it.
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Meanwhile over at the BBC website Robert Peston has written a business piece, based on the usual unaccountable briefings from the usual suspects, that a number of so called key figures from the Blair cult in what is currently the Labour Party are seriously considering crossing the floor of the house and joining the Conservatives.
Part of the rational for this, according to Preston, involves the admiration of these individuals for Chancellor Osborne and his economic policies. This implies a empathy for the neo liberal philosophy which underpins such policies. Apparently Peston claims they feel they have more in common with the economic policies, and therefore by definition the philosophy and analysis, with the Conservatives and Osbourne then any other alternatives.
Now Peston may well be flying a non existent kite or being mischievous. However, when one observes the level of what passes for debate and analysis over at sites like Labour Uncut such rumblings and the reasons for the members of the Blair Messiah movement for wanting to side with the Conservatives should not be entirely dismissed.
I’ll take a look
read something about a rich backer of labour putting forward proposals for MP’s to form a new party – Labour’s Tory Lite, what’s the point of that? Since 210 Mp’s didn’t vote for Corbyn there are serious issues here that could form a deepening crisis-one way or another it has to be resolved-my own view is that Labour’s austerians can go-which will mean a long reselection process-this will be difficult but it would aid the process of reframing the narrative.
Assem Allam – owner of Hull FC – is offering funding if they do.
I thought that offering a financial inducement for a political purpose was bribery, but I daresay he’s run it past his lawyers.
The interesting bit’s going to be when MPs start crossing the floor the other way. Tick tock! 🙂
I do not doubt that members of the labour party are probably making all sorts of comments and threats at the moment as the election of Corbyn has turned their cosy little world upside down.
I’m just waiting to see how much back tracking is going to happen when said members finally “catch up” with public opinion and then workout that support for their leader may not be such a bad thing, why do they think he came from nowhere and carried off such a resounding victory?
If a person on benefits cannot afford a takeaway, the takeaway owner will be the next on benefits. It is about time economists studied the base of the pyramid instead of the top.
@ Roger Alexander
Or put another way:-
Smith clearly stated in his “Wealth of Nations” that we owe our well-being (dinner) not to the benevolence of the baker, butcher and brewer but to their self-interest but self-interest can’t be expressed without demand for which benevolence is clearly needed to provide equitable balance in the distribution of proceeds from business enterprise.
Keynesianism 101
So, Schofield, basic income then and quickly too?
There is no investment left in this, the end-game of increasing inequality: rent-seeking the economically-dominant lbehaviour of the rich and all the money ends up being used to purchase rents.
There us no inflation, either: the rate at which rents subtract all circulating money from consumption is accelerating.
I can’t find the article. Could you post a link?
It’s in the first line
I might be overlooking it too, but I can’t find it either (in the first line).
Thanks. Eyesight not what it was! Will you be putting up the video of your destruction of Andrew Niel on here? It was great to see an arch neoliberal coming off second best!
If and when I can, yes
AEP calls PQE “a variant of helicopter money” and “overt monetary financing of deficits”. Which are terms for the central bank printing money for the government to spend, and not really a form of QE at all.
I was under the impression that you say that PQE is not simply overt financing of deficits, or plain old printing money.
Which is it?
PQE is emphatically not helicopter money
It is OMF – or at least a form of it
HM has uttely different economic impact
But both OMF and helicopter money are basically the Bank of England turning on the printing presses. The only practical difference is that OMF gives the money to the government to spend and helicopter money gives it directly to the people.
I can’t think of any time in history where this has ever worked, let alone been a good idea.
They’re the same except they’re fundamentally different
And you think the post war era was a failure?
How very strange…..
The same except different? The rather important similarity is they both simply print money.
I’m not sure what you are getting at regarding the post war economy. There was a period of good growth between 1945 and 1973 but none of it was financed by printing money.
As I say, it is hard to find a single historical example where printing money has worked – and there are many examples where it has failed and caused terrible economic damage.
I can debate with those willing to address facts
Not those denying them
How often was a susrplus run between 1945 and 1973?
Deebo –
Actually it was financed to a large extent by the printing of money by gov.
At that time bank created money made up a much smaller fraction of our total monetary base, and we used a large amount of notes and coins to make purchases of one type or another.
Now where did that money come from? Answer : from seigniorage, which is a fancy way of saying the gov printing money from nothing. So yes we owe a large chunk of our postwar growth to the gov printing money and then spending it on what society needed.
Deebo – and let’s not even consider how the Industrial Revolution was financed 🙂
@Richard Murphy
You don’t seem willing to debate “facts” at all. You haven’t answered my question – can you give me a single historical example where printing money has ever worked?
Instead you start talking about the post war era. Where a surplus was run 3 times before 1973. 48-52, 55-56 and 69-71. And sorry @alexw – seignorage didn’t pay for all that GDP growth either – the money supply post war grew at a slower pace than over the last 15 years.
So those are the facts, but I get the feeling you really aren’t very interested in facts or debating when it shows you up.
UK government debt has in absolute terms risen steadily since WW2 – as your own comments show
That is money printing
And so has GDP risen massively
The two are not chance: they are inextricably linked
And the same is true across the western economies
Government debt used to underpin investment has fueled prosperity
To argue otherwise is to out your head in the sand: this is fact
If you deny fact I cannot engage
If you are claiming that debt issuance and PQE are the same thing – both printing money – then you seriously need to look at your economics. Bond issuance doesn’t directly affect the money supply. PQE does.
Your own argument is that PQE never needs to be repaid and so it can be used to pay for things instead of regular debt. We’re talking about the difference between debt financing and printing money – not that debt financing can generate growth.
As I asked before, can you give me a single example, just one, where money printing (like PQE ultimately is) has worked. I can give you lots where it has proved to be economically disastrous.
I have argued PQE is new money
And I have answered your question endlessly as have others
So you will not be commenting again because you are now time wasting
Not sure Ambrose realises that the EU process differs from PQE in that is purchasing existing assets.
Doesn’t differ much, to be honest
Well done on Daily Politics today Richard. Andrew Neill wasn’t listening to your answers half the time, but the facts came across well.
Thanks
Meanwhile , in the Telegraph, Carney warns of the danger of QE.
Krugman has written a lot about how “Very Serious People” have been predicting inflation, double digit inflation and ,even, Weimar, since the inception of the idea and seem undeterred by the fact of it not happening.
Carney needs to do his day job properly
Right now he is not
Here, I think: http://www.telegraph.co.uk/finance/economics/11869701/Jeremy-Corbyns-QE-for-the-people-is-exactly-what-the-world-may-soon-need.html
! And quite a few moderate, reasoned, and thoughtful comments under the fold. Good heavens!
I picked up an abandoned copy of Tuesday’s Telegraph on the train on Tuesday night.
Lots of sneery comments about Corbyn’s clothes, as if anyone cares. A startling revelation that one of the cab drivers who has ferried him around a bit during the campaign has a friend who is a Sinn Fein member, I kid you not.
But the letters page had 6 or 7 letters on the Labour leadership, only one of which was anti-Corbyn, and the Business lead was saying pretty much the same thing as today’s article, and citing Milton Friedman and the ex-chair of the Federal reserve in support of the idea.
These are strange days.
Strange days indeed
(What song is that from?)
I thought at first https://www.youtube.com/watch?v=-NSz-9qqgKE The Doors, Strange Days, but digging a little deeper have settled on John Lennon, Nobody Told Me https://www.youtube.com/watch?v=gBCdlBrgEmE
Lennon!
Thank you
Been bugging me