Post Brexit QE is not what we need. People’s QE is.

Posted on

I am going on  holiday tomorrow, so let me get my thoughts on QE in early given that there is at least a chance that the Bank of England might announce a resumption of the programme whilst I am heading away as part of its post-Brexit manoeuvres.

First, let's recall what QE is meant to do. The aim is to buy government bonds to reduce the yield on low risk funds with the intention of pushing money into higher risk assets where it is hoped that the cash in question will be used to stimulate real productive activity, and so demand, and as a consequence inflation in due course.

Second, let's remember there has been £375 billion of this to date. None has been reversed and none ever will be because the market simply has not got the capacity to buy this debt back and fund continuing government deficits at the same time. So QE is in fact money printing in all but name.

And third, let's be clear that it has not worked. Bond yields have fallen to near enough nothing but demand for them ha grown despite that. Any funds that have moved towards equities have been used for speculation but not for investment (and there is, in any case, almost no link between equity investment and the real rate of investment in productive assets because no company of any size funds tangible assets in that way). And so there has been no inflation (it's fallen) or growth of consequence, let alone in wages.

All that has happened is that bank's balance sheets have been boosted by near enough free money that they have lent at a profit, banker's bonuses have been maintained, speculation has continued and asset prices have grown, seriously increasing the UK wealth gap as a result at cost to society at large. All this as pretty much predictable in 2010, as I said at the time.

So why might we do it again when the option of People's Quantitative Easing or Green Infrastructure Quantitative Easing as I prefer to call it is available? Let's start with the fact that we give the right to make decisions on this issue to the City shall we, and stop there shall we? No further explanation is needed.

Quantitative easing now would be a policy for the continuing power of the 1% in the UK economy and be of no benefit to anyone else. Surely the message that this is politically unacceptable will filter through sometime soon? Won't it?

I sincerely hope so.

There is a very strong need for action post Brexit but QE is not what we need.

People's QE is.