In the Guardian last week, Simon Jenkins observed that there is too little money around and so a chronic shortage of demand. He adds that Britain and the US addressed this challenge by “printing money”, by quantitative easing (QE).
But QE just channelled billions into bank vaults and boosted reserves, went to stockmarket inflation and into ‘obscene bonuses’.
Jenkins notes that the commentator Anatole Kaletsky has pointed out that if the £375bn of QE had gone to private bank accounts rather than to buying bonds from banks, it would have meant £24,000 per British family and that this would have ‘transformed the demand economy’.
In a letter signed by a number of experienced people, instead of this indiscriminate shower of cash, the advantages of well-targeted “green infrastructure QE” were set down. It would stimulate the economy, boost employment and tackle climate change countrywide by:
- making the UK’s 30m buildings super-energy-efficient
- dramatically reducing energy bills,
- fuel poverty and
- greenhouse gas emissions.
- tackling the housing crisis by building affordable, highly insulated new homes, predominantly on brownfield sites
- providing job security and
- local business opportunities and
- rebalancing the economy.
The letter ends by pointing out that the “jobs in every constituency” element inherent in green infrastructure QE means that it should become a political imperative for all parties in the run-up to next May’s election.
Colin Hines, Convenor of the Green New Deal Group, addresses the Financial Times:
Your editorial was correct to call on the European Central Bank to look at QE, but wrong to say that QE shouldn’t address inequality (‘Farewell to the Fed’s QE3, a monetary job well done’ Financial Times November 1st/2nd).
Opinion is now coalescing around the realisation that rising inequality and the fall in real incomes is threatening future growth through its adverse effect on effective demand within countries.
In terms of the UK, its leading export markets like those of the rest of the Eurozone, are also experiencing slowdowns in effective demand. This points to the need for countries of the EU to concentrate more on their domestic economy, but in a way that benefits all corners of nations as well as the environment. This suggests the need for a new round of QE, which would tackle these problems head on this time.
In the UK this could contribute to funding a carefully-costed, nationwide programme of energy efficiency in the nation’s 28 million homes and 2 million commercial and public buildings. Also crucial, such a QE programme would help to overcome the present annual shortfall of 240,000 new, affordable, sustainably sited, energy-efficient homes.
The previous QE purchased government bonds, and ‘green infrastructural QE’ could buy bonds from a suitably enhanced Green Investment Bank to invest in such a programme.
This is technically feasible since earlier this year your paper reported the Governor of the Bank of England as saying that if the government requested it, the next round of QE could be used to buy assets other than government debt (‘Mark Carney boosts green investment hopes’ Financial Times, March 18th, 2014).
This ‘jobs in every constituency’ approach would create employment, business and investment opportunities in every city, town, village and hamlet in the country, providing a vote winning commitment for all political parties in the run up to the election.
On Wednesday the FT reported that the governor of the Bank of England wanted to inject more money into the economy and that the BoE has so far bought £375bn-worth of ‘gilts’ – gilt-edged securities – mainly held by insurance companies, banks and pension funds.
The Treasury spent many years abruptly dismissing any increase in government issued money as inflationary – sending its juniors to monitor the seminal parliamentary meetings sponsored by MP Austin Mitchell and organised by Sabine McNeill (Forum for Stable Currencies). At one of these the writer sat with a very sceptical young investment banker who afterwards admitted he was won over by a presentation by James Robertson.
QE? Sterling would collapse!
Below can be seen the now-sidelined argument that this would create inflation and sterling would collapse, committed to paper by Anthony Nelson, then Economic Secretary to the Treasury in John Major’s Government, who became Minister of State at the Treasury, Minister for Trade and Industry, before passing through the revolving door to become Vice Chairman of Citigroup.
Earlier this month, the voice of sanity, MP Caroline Lucas, wrote:
This week, the Bank of England is expected to announce a new batch of quantitative easing to the tune of £50bn or more. A new report from the Green New Deal Group and Southampton University economics professor Richard Werner, who coined the term quantitative easing, is calling for such cash to be injected into green investment to support badly needed renewable energy and energy efficiency projects. Rather than handing the money over to the banks, who then sit on it, green QE would put money into the wider economy – creating thousands of new jobs, improving energy security and tackling climate change at the same time.
In other words, as MP Austin Mitchell’s 2008 EDM also advocated, use this money to create real work in the real economy – the unproductive financial institutions can do without it!