Presents both side on the issue about as well as can be expected in this kind of venue.
In his campaign presentation on the economy a few weeks ago, Corbyn suggested giving the BoE “a new mandate to upgrade our economy to invest in new large-scale housing, energy, transport and digital projects: QE for people instead of banks”. The plan is based on proposals from Corbyn’s main economic adviser, tax campaigner Richard Murphy.…
Murphy suggests that this form of QE is only now being considered because “money has only recently been properly
understood for the first time”. He seems to believe that advances made in the subfield of economics known as “modern monetary theory” (MMT) make people’s QE feasible. (Crudely, adherents of MMT hold that governments with the power to issue their own currencies will always be solvent, and that inflation is caused primarily by resource constraints, rather than monetary growth.)
Here's the contra:
By contrast, most other economists, commentators and politicians – Labour and Conservative – view people’s QE as having obviously dangerous inflationary consequences.
Why is that?
It would fatally compromise the BoE’s standing on global credit markets. As Robert Peston put it in his BBC blog,m“the lore of central banks – which, rightly or wrongly is almost universally accepted by investors – says that central banks should only look at whether there is too much or too little money in the economy… and not at narrowerquestions, such as whether there are enough roads or houses being built in Britain”.
If markets believe the BoE is no longer exercising judicious restraint in its creation of new money, and is instead the de-facto vehicle for funding politically popular projects, sterling would weaken and inflation rise.
By how much? That’s impossible to say. But even if we are not talking about Weimar Germany, there is little doubt that investors would conclude that the risk of investing in sterling and the UK had grown.
In other words, because "expectations."
What is QE for the people?
Simon Wilson
