Friday, 7 October 2011

Citizens' QE is needed to get money into the 'real' economy

Last month, The Guardian published a letter of mine calling for Citizens' Quantitative Easing. There has never been more of a need for this policy than now. Instead of piling more electronic money into the coffers of banks, which resolutely refuse to lend it on, or cutting taxes (which loses the Government revenue), simply printing money and giving it to the people in the form of vouchers which can only be spent locally and through SMEs or traders will give a much needed boost to the REAL economy. It's been done in Taiwan. It can be done here. It should be done here.

When I hear on the radio this morning that "£75bn is being created, given to the banks in the hope that / to encourage banks to lend a little more or with lower interest rates, into the real economy" I am angry. So we give them £75bn and then only "hope" they'll do what is essential. This is crazy. How many other sectors would get such largesse on the off-chance they'll do what is required in the national interest? My scheme gives £200 each at cost of £9.6bn. The next round of QE is equivalent to £4500 each. This is, to coin a phrase, 'crazy money'. It's just electrons in computers in the final analysis, so why not put these electrons to good use in the real economy rather than shower it on the people who got us into the mess in the first place, ad infinitum?

Based on Question Time last night, when one audience member advocated something like Citizens' QE, I suspect that the people are getting more and more bewildered at how £75bn can be magicked from thin air, but their local NHS centre is cut, or their youth centre which cost £200k per year, is closed. Seems like monetary activism is reserved for the large banks and the City while the rest of us are expected to make do with Cameron's "can-do optimism".

People won't buy this for much longer. Not least when we go into recession again or the banks, yet again, need re-capitalising and Osborne comes to taxpayers for another bailout. It is simply politically unacceptable and there will be political and social consequences which are not pretty.

I suspect we are in the calm before the storm. The defenders of the status quo have a lot more explaining to do to ordinary people to show them how this 'system' works in their interests.

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