Having recently uncovered in its own research that quantitative easing is enriching the richest 5%, and the British economy still mired in the doldrums even in spite of hundreds of billions of easing, the Bank of England announced last week that it was grounding its fleet of helicopters dropping cash onto the big banks and suspending the quantitative easing program.
Yet, this may not be the end for British monetary activism.
Anatole Kaletsky wrote last month:
This week an even more radical debate burst into the open in Britain. Sir Mervyn King, governor of the Bank of England, found himself fighting a rearguard action against a groundswell of support for “dropping money from helicopters” – something proposed by Milton Friedman in 1969 as the ultimate cure for intractable economic depressions and recently described in this column as “Quantitative Easing for the People.”
King had to speak out because the sort of calculations presented here last summer started to catch on in Britain. The BoE has spent £50 billion over the past six months to support bond prices. That could instead have financed a cash handout of £830 for every man, woman and child in Britain, or £3,300 for a typical family of four. In the United States, the $40 billion the Fed has promised to transfer monthly, with no time limit, to banks and bond funds, could instead finance a monthly cash payment of $500 per family – to be continued indefinitely until full employment is restored.
Has the Bank of England stopped one program in anticipation of beginning another? Will be the Bank of England begin to inject cash directly to the public, bypassing the banks?
It is more than possible.
Could this mean some kind of debt jubilee? That is less likely — policymakers seem to remain fixated on demand and consumption, when the greatest obstacle to economic activity is the total level of debt.
ten years ago everyone laughed at Mugabe. we’re all Zimbabweans now.
I tend to believe hyperinflation needs more than just money printing… global trade shock, war, natural disasters collapse in production, collapse in agriculture…. those kinds of things. I think the impact of this would be a raise in inflation, but by no means Zimbabwe. All the possible Zimbabwe scenarios would require a blowup of the middle east or the Pacific rim or some kind of huge natural disaster.
in general I agree, however it is still direct invitation for hyperinflation. it would be nice to forgive debts but it will not work. lunch has been already eaten and someone has to replenish food in warehouse. now the problem is to put proper food back into it. jubilee in many cases mean inflation which distords perception through Cantillon’s effects. on the other hand sticking to rotten financial structures does not ensure proper stock will be returned to the economy… what a mess
It is the closest thing a central bank can do to provoking it…
The BoE has little choice but to follow the Fed. If the Fed inflates and the BoE does not, the # will increase in value, trashing global competitiveness. This is how the U.S. exports inflation.
As long a the dollar remains the reserve currency [and there is nothing at the moment that could take its place], it will have to be the Fed that stops the QE non-sense first.
Currency wars (whores?).
See, I am not entirely sure that the effects triggering the race to debase occur so much in the real world. I don’t think prices to global markets are half as sticky as they are assumed to be. In cross-border commodities, the exchange rate is very often cancelled into the price (e.g. oil), simply by pricing in dollars. But these effects are assumed to be real, so neoclassical/New Keynesian policymakers suck it up and debase. Empirical evidence: the country with relatively the strongest currency since 2008 has been the dollar. And the dollar has had relatively a much stronger recovery than the UK or the eurozone. I could do a post on this………….
Please do, but is it not true that Canadian and Australian dollars [as well as the Swiss Franc] have significantly appreciated in this time-frame?
If your deal is mercantilism [export-based], then you have little choice but to hitch your wagon to the $ because the U.S. is most likely your biggest market [maybe Europe, but the $ and the E are pretty closely tied (more or less)].
With Mal-wart and others demanding super low prices from suppliers [with correspondingly low producer margins], who can risk a significant appreciation in their currency? Look how low they have kept the yuan through massive printing.
USDCAD at par since 2008…. USDAUD has declined (but Australia is a special case that backs up my argument that countries with strong currencies have done better as it has been relatively strong economically).
I would happily trash my global competitiveness – in the race of giving away fruits of my labour for free – in exchange for appreciation of my wallet. why work like mad when you could early retire?
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I thought about this situation before reading your blog. I conclude that there needs to be a Uber Tax on the 1%, either on land property, death duties and other “flacid” capital. It is time to recirculate, as the capital has been captured by the elite (They are good at it, must be the genes-blue bloods)
There is no other solution but redistribution of “old Money” Money that has been accumulated and earned through monopoly power and sheer capital power.
It is like trading places. They will earn it back one day.
We recycle rubbish, lets recycle capital.
BTW, my idea of QE for the people would come from existing taxes, not printing money, so won’t be inflationery. But forst we need capital recycling then to implement the income harvesting, storing and release to manage the business cycle and inflation
I agree, BR. You must tax unearned income and property, and income over 500K [or whatever might work]. You never want to penalize productive behavior [earned income], as long as it is really earned income.
Capital gains enjoying a lower tax rate [in the U.S.] than earned income is total bullshit and one of the greatest tax scams ever.
Agreed. In 2000 the Australian government changed tax laws that favoured capital gains. Guess what. People with access to capital and lending facilities snapped up all the property, which placed high demand with home buyers, now we have situations where housing costs more per week than what the welfare cheque provides. So we have this situation.
“Lately, Nielsen has noticed a disturbing symptom of the affordable housing crisis. “It’s almost impossible to rent an apartment now if you’re on Centrelink payments,” he says. “It’s much easier to spend $500 on a car and live out of that. Honestly, so many young girls are sleeping in cars these days, or in campervans on the side of the road.” It’s also opened up a new avenue for predators. “If you’ve got a van, suddenly you’re a pimp,” he says. “They’re mobile brothels. I mean…it’s a total nightmare.”
Those who can still afford to participate in the system [1%] rarely have any problem throwing the rest under the bus.
Toss them a little gristle, and they’re more than happy to let the Elite [.01%] drag the carcass off to their den.
Back in 2007, I said that the crisis wouldnt end until governments mailed out a £50,000 check to every man woman and child in the country (possibly age adjusted by day for under 18’s)
Looks like we are getting closer to that
Why not make it 50 million?
My thoughts exactly. I have long wondered why can’t the government simply give each and every one of us enough money that we’d all be rich. Seems simple enough, so why don’t they?
Pretty cool, even if it not really related to economics! 😉
I think an addittion to my solution to the crises is the return to absolute Monarchy. Monarchical secessors have a lower probability of being psychopaths, and more likely to be benevolent, than democratically elected leaders. All people who crave power and go about being elected by lies and deceit and machivellian mischief, are not likely to be benevolent.
What we need is a power grab by someone with ancient ties to Royalty backed by an army of followers who believe in truth fairness and justness. With no reason to fear loss of power, they are more likely to want to leave a legacy as benevolent wise and just monarchs. They could seize wealth from the top 1 percent and redistribute to the 99 percent. Because the 1 percent no longer have their puppets to deceive, they will be powerless.
If Tribal leaders (why were they leaders) convinced men to go to battle back then, why not now? Democracy is not working because it is flawed from the beginning. We would be better off choosing 5 people from society using a random draw, than the current crop of glorified school captains and prefects who will stop at nothing to achieve notoriety and power.
Instead of helicopter drops of cash, charge the Debit cards of the 99 percent with a new currency, excluding the 1 percent, abolish property titles, then allow everybody to participate in a land grab auction
You might enjoy this article then:
1000% inflation is a-okay now 🙂
(I think it’s a bunch of theoretical nonsense)
His mistake is believing that inflation can ever be regular and predictable. Subjectivity of value causes enough volatility to make this impossible.
What do you think of this theory? http://libertyloveandjusticeforall.com/2012/12/08/debt-reset-is-inevitable/