Coppola Comment

I have repeatedly said that  I do not support Jeremy Corbyn's "People's QE". But there seems to be considerable confusion about what exactly I oppose. And that is for one simple reason: the deliberate conflation  of government investment spending and QE by the architect of this scheme. PQE is composed of two separate and distinct strands: 1. Government spending to finance investment in infrastructure, innovation, R&D and housing 2. Bank of England purchases of government bonds.  Despite the insistence of the scheme's creator that one is impossible without the other, these two strands are actually not interdependent. In fact they are unconnected. As the UK is a member of the EU and a signatory of the Lisbon Treaty, it is not possible for Strand 1 to be directly financed with money from the Bank of England. But there is nothing to stop the government issuing "Corbyn bonds" to the UK private sector for Strand 1, either directly it...

Guest post by Paddy Carter. Jeremy Corbyn’s People’s QE offers the alluring prospect of spending more without borrowing more . Which is just the ticket, if you want to replace austerity with largesse, and cut the deficit to boot. Sadly, this appealing miracle cure is pure snake oil (although there is, perhaps, a version of the idea which might be helpful, if substantially less miraculous). The basic idea behind People’s QE is to finance public spending by printing money. This is actually something that happens all the time, and it is by understanding how, and why, that we shall see why People’s QE, as sold, is an empty promise. As the real economy grows, the money supply has to keep up. Suppose we wanted zero inflation then, as a first approximation, we would expect the money supply to grow at the same rate as the real economy. If the economy grows at 2 per cent a year and base money (reserves and bank notes) grows at the same rate as the broad money supply (debit accoun...