I note that Larry Elliott wrote this in the Guardian last night when commenting on the Bank of England's inaction on interest rates:
Threadneedle Street wants to use what limited ammunition it has at a time of its own choosing and after it becomes clear what the Treasury is going to do under its new boss. Clearly, austerity plans will be softened, but the focus on infrastructure and industrial policy has prompted talk of the Treasury issuing infrastructure bonds that would be bought by the Bank. This would be the May government's version of something Jeremy Corbyn floated when running to be Labour leader last year: People's QE.
It looks like Corbynomics will have its day after all. But not with Jeremy Corbyn in charge.
Last summer I was supposedly going to trash the economy the economy with this idea. Chris Giles at the FT belittled People's QE.
I could, of course, be wrong, but I suspect People's Quantitative Easing will now be what revives any chance the UK economy has. It's come a long way since 2010.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Well, good if that happens. I suspect that we might get something else because I’m still worried about that term ‘project bonds’ that seems awfully ill-defined. Could it be that Elliot does not know the difference?
Of course you don’t really need the ‘bonds’ route, all that needs to happen is to credit the accounts of the firms doing the work. But hey, why abandon all the nice historical language so that people don’t think it is money printing?
Symbolic Simon, most people fall for the money doesn’t grow on trees stuff and that printing/direct spending guarantees hyper inflation and collapse. To use a hackneyed phrase, this is in the DNA of common economic understanding. Can you imagine the reaction if it was admitted that money printing is fine under the right circumstances. Just like any pure ‘ism’ is bound to fail so is any adherence to a single economic theory.
The hyper-inflation whining is done by the ignorati who never complain about commercial bankers blowing house price bubbles since the early 1970’s in the UK. The whining is always done about government without a moment’s pause to reflect whether it’s the commercial bankers or the government who’ll act to dampen down hyper-inflation should it occur and consequently have an incentive to monitor the effects of their money creation relative to resource availability ( the lesson learned from the Weimar Republic and Zimbabwe). Clearly there is a huge task to be undertaken to educate the public about the role of money and how its created. You can bet this won’t be undertaken by a Neo-Liberal party whether of Blue or Red Tory complexion for the reasons sketched in the brief article below. This leaves only the prospect of a Corbyn led centre-left to possibly take on the task:-
http://heteconomist.com/neoliberalism-the-attempt-to-subsume-society-into-the-market/comment-page-1/#comment-612484
Such a task would involve finding a simple way to get over the points that the economist Stephanie Kelton made in the Financial Times back in 2013 that there are various ways for a sovereign government to create money from nothing for large infrastructure investment programmes or plain old fiscal stimulus initiatives with tax reductions or credits:-
http://ftalphaville.ft.com/2013/12/12/1721592/guest-post-the-helicopter-can-drop-money-gather-bonds-or-just-fly-away-3/
The bond issue may be ‘symbolic’ as Alistair says or it may be that it defines and declares the expenditure commitment – in advance and in terms that people are familiar with.
I’m not sure that it matters all that much really. As the idea becomes more firmly established the formalities will seem less important.
I’m more concerned that people get free lunches out of the secondary market.
Fair call, very fair. I’ve no doubt the non
…the traders and and other assorted non-producers look forward to the bond issues. Stuff ’em.
keeping the feckers with the sticky fingers out of the pot and stopping them corrupting this to their own ends…never easy. But hard as the task may seem stopping a gradual creep back to bad old ways is harder. I can’t help but feel that not only has political engagement dropped off but collective awareness has as well. It’s the constant MSM bombardment, one I was thinking of yesterday was the term taxpayer. This has become common usage when describing citizenry but it feeds into the concept of a $ a vote. It underlines the concept of net contributors at the top all the way down to scroungers at the bottom. Sweeping aside the contribution made by unpaid labour.
Jeez this sort of stuff gets me thinking along anarchist socialist lines. Everything, apart from individual creative freedom, has to justify itself. If it doesn’t serve the common good then tear the institution down, whether that’s a private bank or a state construct.
And what would you replace it with?
Nothing, if it doesn’t serve the greater good then it’s gone or altered to a form that does. For example your suggestion about turning RBS into a state owned green bank would fit this exactly. Though I may differ slightly in what it would be about.
Say we convert RBS and, as well as the green stuff, we create a current account for every citizen, use NI or NHS numbers. These accounts could be used to pay Citizens Income/UBI and maybe offer some selective state investments. This would all be protected by state backing, you’re free to have your money anywhere else but under free market conditions, no state insurance or regulation. Like a modern style separation.
Just musing out loud here really Richard and my thought about removing the useless doesn’t apply all the way down. It’s more in reference to the big stuff, not markets around optional consumables.
Fair enough
Keep thinking
I’m waiting until it does happen.
Then Richard, I will expect an invite for a glass of champers round at your place along with everyone else with hip, hip hoorays and ‘For he’s Jolly Good Fellow’ thrown in for good measure.
A deal
You know that in a way this is perfect because the idea now becomes broad, bi-partisan and politically neutralised. You can forget about the politics and concentrate on the multiplier. This is all quite remarkable. Historical change is emerging and your part of it.
Of course Chris Giles looks stupid in retrospect, Yvette Cooper even more so. Her PQE critique should disqualify her from even thinking about leadership.
One should probably wait and see what happens before giving those sort of people the brown carpet nose-rubbing they so richly deserve. I seem to recall hearing something about a dish that is best served cold.
IMF thinks multipliers of over 2 likely on this
The big question is – why did the government start investing in large infrastructure projects, a new deal if you like, back in 2008? Why the wasted years since?
Labour did – invested heavily
The cut back was massive from 2010 and in real terms is still ongoing
It doesn’t really matter what you call financing infrastructure investment used to stimulate the economy as long as government again take responsibility for managing the economy.I believe the problem is that people who should know better e.g.PLP are too wedded to free market economics,but if we look at history to 1923 when Labour first gained power the PLP failed simply because it relied on free market economics.As a consequence in 1925 the Tory government returned Britain back to the gold standard which led to recession and the great depression of the 30’s.The war led people to see that government spending could be used to manage the economy which led to the 1945 Labour government having a better understanding of how the economy really works.Unfortunately Labour lost its way during the 70,s and by the time Blair came along those lessons which had been so painfully learned were completely forgotten.Today the PLP is at a crossroads does it campaign for real economic change e.g. QE or be apologists for free market economics?
It has only one choice – it has to go for QE et al
But that does not mean only one choice of leader
it’s becoming clear that Labour are just not communicating to the ‘outside’ world.
They should be hammering the Tories for hypocrisy and U turns and all sorts of things that condemn the past 6 years of what is now being implicitly admitted by the Tories themselves as the wrong direction!
Milne seems to have gone quiet or is asleep at the wheel/ head up own backside?
Only one-ONE! M.P seems to have made the effort to challenge the disgusting hypocricy of May and her role in one of the most arbitrarily cruel and right wing Governments in recent times.See: http://www.mirror.co.uk/news/uk-news/theresa-cannot-hide-record-david-8412623
FFS Labour! (membership Card into Shredder VERY soon)
But can I make the point that this Labour you are talking about is controlled by Jeremy Corbyn
And it has not issued a press release since Brexit, apparently
You might be right, Richard, but I don’t really know who is in control. The fact that an M.P I hadn’t heard of is the only one to have the ‘cojones’ to say what needs to said about May is a bad sign and doesn’t say much for Corbyn and many others who haven’t had the nous to bother.
If we end up with a de facto One Party state explicitly then even the part illusion of democracy has gone.
I am waking up to the fact that Corbyn has to take blame for the present silence as well but so do the others for sure.
I agree that doesn’t mean Labour as only one leader to choose from but does mean QE should be part of its economic programme.I remember last year when Labour was trying to choose a new leader a female comedian compared Jeremy Corbyn to Gandalf out of the Lord of the rings who would put Labour back on the right path.But as any fan of the Lord of the rings will tell you it was Aragorn who led the people to victory and likewise only someone who can project a vision of what a Labour government could do should be ever be considered as leader.Unfortunately Jeremy Corbyn and even Angela Eagle aren’t giving the people that vision,
Derek
The only way forward for labour is for a strongly anti austerity candidate to step forward advocating actual policies communicated in clear and simple terms.
I can’t help but feel Corbyn would now happily hand over to someone along those lines, but anything less will split the party.