What is QE for the people?

hat tip to Tom Hickey at MNE

Et MMT ideed jõuavad poliitikasse üht- või teistpidi:

What is QE for the people?

Labour leadership hopeful Jeremy Corbyn has a controversial plan to boost the economy by printing money to pay for infrastructure. Would it work? Simon Wilson investigates.

What is the ‘people’s QE’?

It’s a plan for the next Labour government to reactivate the Bank of England’s (BoE) electronic printing presses (which pumped £375bn into the UK between 2009 and 2012 via quantitative easing, or QE) and boost the economy by creating money to invest in infrastructure. It’s part of what the likely next Labour leader, Jeremy Corbyn, sees as a necessary “rebalancing away from finance towards the high-growth, sustainable sectors of the future”.

In his campaign presentation on the economy a few weeks ago, Corbyn suggested giving the BoE “a new mandate to upgrade our economy to invest in new large-scale housing, energy, transport and digital projects: QE for people instead of banks”. The plan is based on proposals from Corbyn’s main economic adviser, tax campaigner Richard Murphy.

It would involve setting up a new national investment bank, which would issue debt that the BoE would buy using printed money. Other bodies, such as a green investment bank, local authorities, health trusts and similar agencies, would also create and issue debt in a similar manner.

Who’s in favour?

The Financial Times’ Matthew C Klein has written a blog arguing, with caveats, that the core idea is sound. Klein argues that to date QE hasn’t proved inflationary, and that even the BoE admits most of the benefits have accrued to the wealthy, rather than wider society.

“People’s QE” – which some object to because it amounts to the government using the central bank to finance its spending – would do nothing to undermine central bank independence, as this independence is just a polite fiction.

So why hasn’t it been tried before?

Murphy suggests that this form of QE is only now being considered because “money has only recently been properly understood for the first time”. He seems to believe that advances made in the subfield of economics known as “modern monetary theory” (MMT) make people’s QE feasible. (Crudely, adherents of MMT hold that governments with the power to issue their own currencies will always be solvent, and that inflation is caused primarily by resource constraints, rather than monetary growth.)