Tag Archives: quantitative easing

New generation QE could stimulate the economy, boost employment and tackle climate change

The Times reports that Howard Archer, chief economist at IHS Global Insight, predicts that quantitative easing, which has been on hold since 2012, will be revived in August, with an extension of the Funding for Lending Scheme, which provides cheap finance for major lenders in an attempt to get credit flowing.

QE – as currently administered – sees the Bank pumping money into the financial system by buying bonds from financial institutions. Adam Marshall, acting director general of the British Chambers of Commerce, said the employers’ group would support more QE in principle “given the exceptional circumstances of the Brexit vote”. However, he called for QE to be overhauled and “aimed at injecting money into corporates and small and medium-sized companies”.

Others would advocate more widely beneficial applications; a new-generation quantitative easing programme could stimulate the economy, boost employment and tackle climate change instead of – as before – simply adding more cash to bank balance sheets and inflating asset prices.

The latest policy proposal is Green Infrastructure Quantitative Easing (GIQE). Last year, economist Richard Murphy addressed the Convention of Scottish Local Authorities to present this in detail as a programme that would buy bonds issued by the Green Investment Bank to fund making every building in the UK energy efficient, and, where feasible, fitted with solar panels, which would reduce energy bills and in the process tackle fuel poverty and cut greenhouse gas emissions. In addition, it would fund sustainable energy projects and enable local authorities to pay for new houses, NHS trusts to build new hospitals and education authorities to build schools.

gnd coverThis concept of directing quantitative easing to fund the greening of the UK’s infrastructure was first included in the 2013 report ‘A National Plan for the UK’, issued by the Green New Deal Group, convened by Colin Hines.

The new economics foundation also published a substantial 2013 report ‘Strategic quantitative easing’, apparently targeted at the banking world, with an extensive analysis of the current monetary system and applications of quantitative easing and a reference to its role in increasing exports in addition to the Green Deal and housebuilding references.

MP Caroline Lucas persuasively summarised the proposal in the New Statesman:

“GIQE could contribute to strengthening the UK economy via a carefully costed, nationwide programme to train and employ a ‘carbon army’. This army would be at the frontline of the fight against cold homes by making all of the UK’s 30 million buildings energy efficient, and, where feasible, fitted with solar panels. This would, in the first instance, dramatically reduce energy bills and fuel poverty, whilst also cutting greenhouse gas emission and cutting current dependence on imported energy.

“Secondly, a GIQE programme could also help tackle the housing crisis by financing the construction of new affordable housing that’s highly energy efficient and built predominantly on brownfield sites.

“Thirdly, GIQE could help finance improved regional public transport networks to help revitalise local and regional economies. That’s more and better buses, trains and coaches, helping people to get around their communities and stay connected . . .

“It’s time that both the Government and the Opposition, rather than continuing to hand money over to the banks as they have done since the financial crisis, will seriously consider this plan to build a resilient economy, protect our shared environment and create thousands of new well paid jobs.”

 

 

 

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Will Government consider new tools for the Bank of England?

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The first proposal has been made by Mark Blyth, Eastman Professor of Political Economy at Brown University; Eric Lonergan, Fund manager, M&G Investments; and Simon Wren-­Lewis, Professor of Economic Policy at the Blavaynik School of Government, Oxford University.

Stimulating demand – QE for the people

They note that government policy is based upon a belief that now the crisis is over, the private sector will flourish and interest rates gradually normalise. But rather than relying on policy-­making based on hope, the writers propose that the government legislates to enable the Bank of England to make payments directly to the household sector – quantitative easing [QE] for the people. They refer to evidence that transfers to the household sector have a great impact on demand; consumers appear to spend between a third and a half of any cash windfalls.

Funding job creation

Positive Money adds to this, “When new money is created, it should be used to fund vital public services or provide finance to businesses, creating jobs where they’re needed, instead of being used to push up house prices or speculate on the financial markets . . .”. This proposal would enable the increased household demand to be met by domestic suppliers, reducing the trade deficit.

And transforming Britain’s buildings and energy supply

The Green New Deal Group advocates that a programme of ‘green quantitative easing,’ rather than propping up failing banks, could help to reduce the public debt and kick-start the transformation of the UK’s energy supply and housing stock, creating thousands of new green-collar jobs.

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Will government expand the Bank’s mission: “Promoting the good of the people of the United Kingdom by maintaining monetary and financial stability” by adding purposeful work for all, including the building of an environmentally sustainable housing and energy supply?

Economic revolution – this time in the interests of the general public

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“We’re working to change the UK money system, in order to create a fairer society and a more stable economy” say Positive Money – a movement to democratise money and banking so that it works for society and not against it.

Quantitative easing? When new money is created, it should be used to fund vital public services or provide finance to businesses, creating jobs where they’re needed, instead of being used to push up house prices or speculate on the financial markets . . .

pm conway hall 14People of all ages are rallying to support this work, see some of those attending their 2014 conference in Conway Hall London.

One adviser comments:

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From their website:

We need a change. The power to create money should only be used in the public interest, in a democratic, transparent and accountable way. The 1844 law that makes it illegal for anyone other than the Bank of England to create paper money should be updated to apply to the electronic money currently created by banks . . .

Much of the post-election analysis has pointed towards the handling of the economy as a key factor in the party’s electoral success. But beneath the headline economic indicators is a far more complex picture. For millions of people, the recovery has barely been noticeable and the ratio of household debt to income will soon surpass its pre-crisis level.

A leading economist says:

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Positive Money:

In the next Parliament we will campaign for Parliamentary monetary commission to be set up to analyse the role of money within banking. However, right now we are getting ready to head to 10 Downing Street.

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We are taking our message, that money creation should only be used in the public interest, to David Cameron. Next Tuesday 26th May, members of the Positive Money team and supporters will deliver this petition (signed by over 12,000 people) to 10 Downing Street.

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Readers are welcome to join us! Email dora@positivemoney.org to find out how.

Can you help us reach 15,000 signatures before next Tuesday?
Share our petition: http://www.positivemoney.org/petition/