Free Money For The Rest Of Us - It's what should happen, but I'm sure it won't.

But free money is for the rich only! Even though it would stimulate
the economy!

Friday, July 13, 2012
Free Money For The Rest Of Us
It's what should happen, but I'm sure it won't.

The Bank of England loves QE because it is a policy under its control.
It opposes genuine reflation as possibly leading to runaway inflation
– hardly Britain's top economic problem just now. But the governor
himself is in denial. He appears genuinely to believe that QE is
"putting money directly into the wider economy" and that "the one word
we need to hang on to … is patience". He has brainwashed the Commons
Treasury select committee to this effect. It is like watching a
patient haemorrhaging blood on the operating table and telling him to
wait for a new hospital.

If the government really wanted to inject cash into the economy, it
would address the liquidity trap head-on. It would order the Bank of
England to add, say, £1,000 to the current account of every adult
citizen as a "people's bonus". Such an injection would not depend on
Bank discretion. It would not await a government infrastructure
project or a business wanting to invest. It would instantly transfuse
between £30bn and £40bn of cash into the demand side of the economy.

This need have no impact on Osborne's borrowing targets or deficit,
since it would be new money. The chancellor would declare the bonus
"off-limits", an emergency stimulus to growth. It might push up some
prices and suck in some imports. It might seem to reward the feckless
as well as the thrifty. But it would do what the government claims it
wants to do – that is, "inject money into the economy".

Free money is for rich people, sillies. The poors might spend it on
junk food and beer, instead of caviar and champagne.


Relevant Pages

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