People’s QE is alive, and should be kicking into action sometime soon

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Victor Xing has an article in the FT today in which he discusses the now widely understood and adverse distributional consequences of QE that I predicted as long ago as 2010. In the article he says:

This ... offer[s] an effective segue to allow establishment candidates to tap into populist support and morph their candidacy away from traditional partisan issues (which are vulnerable to disruptors) into struggles for those disadvantaged by distributional central bank policies ....

These views can be seen in Jeremy Corbyn’s push toward “People’s QE”, as well as recent discussions over Universal Basic Income via debt monetization, which is based on Milton Friedman’s “Helicopter Money” to bypass the financial sector in the transmission of ultra-accommodative monetary policies, i.e. “channel QE money directly to the people and communities!”

With Corbyn’s “People’s QE”, the Bank of England would print money via digital ledger entries, similar to traditional QE, to either directly buy HM Treasury’s debt issuance, or directly transfer money to Treasury to pay for government expenditure. (Adam Posen, who served on the Monetary Policy Committee of the Bank of England, once suggested something similar.)

Ben Bernanke’s essay on Milton Friedman’s “Helicopter Money” proposal explained how the Fed would print money to pay for increases in Federal expenditure, tax cuts, or purchases of private assets.

Both of these proposals could infringe on central banks’ hard-won monetary policy independence by turning them into on-demand cash machines for fiscal authorities, although both have the support of at least some central bankers. It would be difficult for monetary authorities to terminate debt-financed fiscal expansion after it was set in motion: social pressure would make an exit politically difficult, for opponents to debt monetization would be labeled as “opponents to making QE fair again”.

People's QE, of which I was the originator, is alive and well and apparently has the support of some central bankers. Let them step forward please: we need them.