...The pity is that the Bank’s new money is going to buy long-dated government debt. That will not achieve much, given how low yields already are. As the prime minister might say, policymakers need a bigger “bazooka”. It would be more effective if newly created money paid directly for government spending. The government could send £1,250 to each citizen resident in the UK. It could also use new money to purchase private debt, including loans to small businesses. This is off-balance sheet public spending. If the chancellor decides to call it “credit easing”, that is absolutely fine....
Read the full post at The Financial Times, Time has come for some intelligent policymaking.
(emphasis added)
(h/t Ralph Musgrave)
Wolf begins his post with Wynne Godley's sectoral balance approach to macro and moves from there to Abba Lerner's functional finance policy — just like MMT. What he needs to add is the job guarantee or employer of last resort (employment assurance) to round it out.
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See also his Time to think the unthinkable and start printing again from 29th September:
Some will argue that a policy of direct financing by the central bank must be inflationary. This is wrong. No automatic link exists between central bank money and the overall money supply. Above all, the policy would be inflationary only if it led to chronic excess demand. So long as the central bank retains the right to call a halt, that need be no serious danger.
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