The Telegraph has reported that:
The global financial system has become dangerously unstable and faces an avalanche of bankruptcies that will test social and political stability, a leading monetary theorist has warned.
"The situation is worse than it was in 2007. Our macroeconomic ammunition to fight downturns is essentially all used up," said William White, the Swiss-based chairman of the OECD's review committee and former chief economist of the Bank for International Settlements (BIS).
It's an opinion, of which the key part, as far as I am concerned, is the element I have highlighted. The message, delivered here and repeated often, is that central banks have run out of weaponry to deal with an oncoming financial crisis.
But that's the central bank view. As the article concluded:
There is no easy way out of this tangle. But Mr White said it would be a good start for governments to stop depending on central banks to do their dirty work. They should return to fiscal primacy - call it Keynesian, if you wish - and launch an investment blitz on infrastructure that pays for itself through higher growth.
"It was always dangerous to rely on central banks to sort out a solvency problem when all they can do is tackle liquidity problems. It is a recipe for disorder, and now we are hitting the limit," he said.
So, three points.
First central banks aren't going to be a lot of use by themselves.
Second, conventional QE has failed.
And third, fiscal policy can work.
So, what's the weapon? People's Quantitative Easing of course: the tool that wraps fiscal policy in a monetary wrapper to ensure that investment is created at minimal cost.
That's the one weapon left in the armoury. After that maybe there is no other. But there is, at least, one that has still to be used. Thank heavens.
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So, what’s the weapon? People’s Quantitative Easing of course
That’s been going on on for a few years, it’s called PPI.
No it is not
It is a million miles away from what I presume you mean, which is PFI
I think he means much of the spending that has created ‘Osborne’s Miracle’ has come through retrieved PPI misselling money. My guess only! (And don’t forget starting to count money spent on drugs and prostitution!)
Ah
In that case I missed one point
But PQE is far removed from that too
Right-wing media are apparently happy to accept messages which might be construed as left-wing when they’re from supposedly right-wing sources. Here’s Mr White, then, from the Daily Mail in 2010 http://www.dailymail.co.uk/money/article-1289074/THE-CITY-INTERVIEW-Sage-warned-global-anguish.html This paragraph might be telling in the light of Carney’s recent refusal to increase interest rates “Can we have zero interest rates forever? If you say no, we have to go back to normal, then the asset prices have to go back to normal. there’s nothing truly sustainable in all this – it’s all artificial.” The Fed, by the way, have recently been forced to create money from nowhere to help average Americans by Congress, as Ellen Brown recounts http://ellenbrown.com/2016/01/16/the-citadel-is-breached-congress-taps-the-fed-for-infrastructure-funding/ America, though, doesn’t have an Establishment largely composed of individuals entirely lacking in merit but drowning in privilege, as we do here. If Osborne grants the creation of money from nowhere to support the interests of the 99% then effectively he exposes his own exalted social position as a scam, a fiction, an invention; by showing money is just something which can be made up he effectively sweeps the rug from under his own feet. I suspect he and others of his ilk would see the rest of us die where we stand before allowing that. Game on then 🙂