Quantative easing for the people

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Quantative Easing for the People or People's Quantitative Easing - PQE (German: Quantitative Easing for the People ) is the political program that Jeremy Corbyn announced in 2015 during the competition for leadership of the Labor Party. The Bank of England should create additional cash to fund government spending. This program attracted a lot of media attention, some critics calling it economic illiteracy, while others defended the program.

The name of the program refers to quantitative easing, i.e. the purchase of government bonds, which is criticized as monetary government financing .

Goal setting

According to Corbyn's suggestion, the Bank of England should increase the supply of money to finance investments in housing and public transport. Corbyn called this concept "People's Quantitative Easing", quantitative easing for the people. With the help of this funding, Britain's economy could modernize. In addition, more social housing could be built to reduce the increased housing costs. For this purpose, the central bank would buy bonds for a state "national investment bank" in order to provide this bank with the necessary funds.

The economic policy concept of Corbyn goes back in part to the theories of the economist Richard Murphy. Murphy suggests this policy of funding for 2020 if in the meantime the economy continues to stagnate with low inflation, low interest rates, high unemployment and low wages, despite the conventional quantitative easing policy being enforced. However, if the economy recovers strongly by 2020, the new PQUE instrument would not be needed, as rising tax revenues would then provide the necessary funds for investments.

The professor of economics Simon Wren-Lewis explains the difference between PQE and the helicopter money, which is often regarded as synonymous, with the fact that the central banks do not pay out the newly created money at PQE directly to the citizens, but finance the state budget or government-initiated investments. According to this, PQE concerns the independence of central banks from economic policy decisions.

Reception and criticism

The concept has been criticized by other candidates for the party leadership for alleged economic "illiteracy" and seen as a risk to investment in the UK. It also contradicts Article 123 of the Lisbon Treaty , which forbids central banks to finance monetary government. A legal dispute at the European Court of Justice is foreseeable. The Daily Telegraph wrote that "quantitative easing" could cause inflation, currently the central bank controls the money it creates and can also "switch off" and reverse quantitative easing. This is not possible when the money is transferred to a national investment bank.

On August 3, 2015, Labor Party's “shadow chancellor” Chris Leslie criticized the proposal because its implementation could result in higher inflation and higher interest rates.

The economist Robert Skidelsky , however, presented a scientific report on Corbyn's program to organize PQE through a national investment bank. The Guardian and the Financial Times published additional analyzes on the Corbyns project. The Guardian also published a critical essay by economist Tony Yates. Yates fears the program could lead to irresponsible government by funding "favorite projects" of a government. Governments could be encouraged to print money to finance apparent economic successes before the next election, which would then be replaced by austerity programs after re-election. This could fuel inflation. Yates also expressed concern that high inflation and uncertainty about economic developments would hit the poorest part of the population the hardest. The Independent newspaper published a comment suggesting the benefits of limited implementation of PQE. Employment and inflation would be promoted, the mountain of debt that had accumulated since the financial crisis of 2007-08 could be reduced.

The Daily Telegraph reported that HSBC's senior economist Stephen King and Standard Life's senior economist Jeremy Lawson would support QEP if the economy continued to slide into a depression despite the application of conventional policies of QE .

In August 2015, Corbyn stated that he had received principled support for his economic policy from Paul Krugman and Joseph Stiglitz .

Following the formation of the Economic Advisory Committee in September 2015, BBC News claimed that the composition of the advisory group, which included Simon Wren-Lewis and Joseph E. Stiglitz , showed that the concept had likely been abandoned. These experts would indeed advocate higher infrastructure investments in phases of low interest rates, but would not support the extreme form of monetary policy because this would destroy the Bank of England's image of protecting against inflation. In the long run, the concept would then become a “bad weather” tool for the next economic emergency.

In February 2016, Ray Dalio , founder of the world's largest hedge fund Bridgewater Associates , said that if QE waned, more monetary and fiscal measures would have to be taken, including helicopter money or monetary government funding like the QEP. 

See also

Individual evidence

  1. ^ A b Andrew Sparrow Senior, Helen Pidd Northern: Yvette Cooper says Labor rival Jeremy Corbyn's policies not credible or radical. In: The Guardian. August 13, 2015, ISSN  0261-3077 .
  2. ↑ a b Would Corbyn's 'QE for people' float or sink Britain? In: BBC News August 12, 2015.
  3. ↑ a b The Labor party stands at a crossroads. In: The Guardian. August 14, 2015, ISSN  0261-3077 .
  4. ↑ a b Corbynomics sounds subversive, but maybe not for long. In: The Guardian. September 4, 2015, ISSN  0261-3077 .
  5. ↑ Corbynomics - what on earth policy is Jeremy Corbyn's economic? Retrieved April 24, 2016 .
  6. ↑ a b Roger Bootle: What are we to think of Jeremy Corbyn's 'people's QE'? In: Daily Telegraph. September 13, 2015, accessed April 24, 2016 .
  7. ↑ Zoe Williams: Can Corbynomics guru Richard Murphy fix Britain? In: The Guardian. September 22, 2015, accessed September 23, 2015 .
  8. ↑ Carlos Tornero Martin: Corbynomics: Everything you always wanted to know about it, explained 'by Richard Murphy. In: The Accountant. August 24, 2015, accessed September 26, 2015 .
  9. ↑ Simon Wren-Lewis: People's QE and Corbyn's QE. mainly macro, August 16, 2015, accessed September 20, 2015 .
  10. ^ Peter Spence: Jeremy Corbyn's 'People's QE' would force Britain into three-year battle with the EU. In: The Daily Telegraph - London. August 15, 2015, accessed April 24, 2016 .
  11. ↑ The Lisbon Treaty Article 123 ( Memento of the original dated August 22, 2015 in the Internet Archive ) Info: The archive link was automatically inserted and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. @1@ 2Template: Webachiv / IABot / www.lisbon-treaty.org
  12. ↑ Nicholas Watt: Corbyn's economic strategy would keep Tories in power, top Labor figure says. In: The Guardian. August 3, 2015, accessed September 20, 2015 .
  13. ^ Robert Skidelsky: Why we should take Corbynomics seriously. In: The Guardian. August 19, 2015, accessed September 20, 2015 .
  14. ^ Matthew Klein: Corby's “People's QE” could actually be a decent idea. In: Financial Times Alphaville. August 6, 2015, accessed August 20, 2015 .
  15. ^ Corbyn's QE for the people jeopardises the Bank of England's independence In: The Guardian. 22nd September 2015.
  16. ↑ George Cooper: People's Quantitative Easing may be the best way to undo the mistakes of the first round of QE. In: The Independent. September 15, 2015, accessed September 19, 2015 .
  17. ↑ Ambrose Evans-Pritchard: Jeremy Corbyn's QE for the people is exactly what the world may soon need. In: Daily Telegraph. September 16, 2015, accessed September 17, 2015 .
  18. ↑ Catherine Boyle: 'People's QE?' Left-wing leader's plans for the UK. In: 2015-08-18. CNBC, accessed September 20, 2015 .
  19. ^ Paul Krugman: Corbyn and the Cringe Caucus. In: New York Times. August 4, 2015, accessed September 20, 2015 .
  20. ^ Paul Krugman: Labor's Dead Center. In: New York Times. September 14, 2015, accessed September 20, 2015 .
  21. ↑ Robert Peston: Corbynomics' Thatcher moment. BBC News , September 27, 2015, accessed March 11, 2016 .
  22. ↑ Jennifer Ablan: Bridgewater's Dalio: 'Helicopter money' might help US economy. Reuters, February 18, 2016, accessed February 19, 2016 .