- Date published:
10:08 am, April 20th, 2016 - 21 comments
Categories: capitalism, class war, economy, International, monetary policy - Tags: helicopter money, printing money, quantitative easing
Printing money, which financial types like to call “quantitative easing”, has brought the global economy some time in what now looks like an ongoing crisis since 2008. But the buzz is wearing off – and there are calls for another fix:
Alan Greenspan: More QE Possible as Monetary Policy ‘Has Done Everything It Can’
Former Federal Reserve Chairman Alan Greenspan said current monetary policy has done everything it can without another round of quantitative easing.
“Monetary policy … has done everything it can unless you want to put additional QEs on,” he told CNBC.
“There’s no real evidence that we’re getting an impact on lending and on the economy picking up,” he said.
In a similar vein, see this interesting piece in The Guardian:
The bad smell hovering over the global economy
Attempts at economic stimulus have left a bad smell. Central banks are starting to think the unthinkable – helicopter money
Don’t be fooled. China’s growth is the result of a surge in investment and the strongest credit growth in almost two years. There has been a return to a model that burdened the country with excess manufacturing capacity, a property bubble and a rising number of non-performing loans. The economy has been stabilised, but at a cost. The upward trend in oil prices also looks brittle. The fundamentals of the market – supply continues to exceed demand – have not changed.
Then there’s the US. Here there are two problems – one glaringly apparent, the other lurking in the shadows. The overt weakness is that real incomes continue to be squeezed, despite the fall in unemployment. Americans are finding that wages are barely keeping pace with prices, and that the amount left over for discretionary spending is being eaten into by higher rents and medical bills.
The plan has not worked. There has been little impact on interest rates, banks have not increased their lending and the yen has risen on the foreign exchanges – the opposite of what was planned – because investors fear that the Bank of Japan is fast running out of ammunition. They have a point. Central banks, of course, swear blind that they are fully in control and that there is nothing to worry about. Perhaps not, but something doesn’t smell right. The fact that economists at Deutsche Bank published a helpful cut-out-and-keep guide to helicopter money last week is a straw in the wind.
As the Deutsche research makes clear, the most basic variant of helicopter money involves a central bank creating money so that it can be handed to the finance ministry to spend on tax cuts or higher public spending. There are two differences with QE. The cash goes directly to firms and individuals rather than being channeled through banks, and there is no intention of the central bank ever getting it back.
The underlying softness of the global economy, however, means that it is quite easy to envisage a downturn in 2017, the 10th anniversary of the start of the financial crisis. In those circumstances, the unconventional would quickly become conventional, as it did after the collapse of Lehman Brothers. The only question would be which central bank would move first. …
The global economy is being strangled by structural problems and greed. QE hasn’t helped, so it seems we’re now seriously considering helicopter money (“QE for the masses”). That might buy us some more time, but it doesn’t address the underlying structural problems. What is needed is major reform – and an end to the illusion of perpetual growth.