Quantitative Easing (QE) is a fascinating thing. Printing money these days means typing a line on a Treasury computer, and praying the markets don't object too much.
June 30th 2013 (edit 7) Updated 19may22
June 30th 2013 (edit 7) Updated 19may22
#Oct23 - This blog is not dead, merely resting.
It is of course the same as a company issuing more shares without any covering payment or assets, and so dilutes the worth of each share accordingly. The UK's last round of QE was in order to prevent banks going bust after the casino asset bubble of the last Labour government finally expired in 2010. Not only had the government run out of other people's money to spend, the banks were completely over committed to loans to buy those bubble assets and RBS was apparently hours from failure.
So the government invented money with which to bale out RBS and the rest, and hoped that everyone accepted that the alternative was just too horrible to contemplate and that dissent would remain muted. Part of this handout was sweetened for the public with dishonest promises that banks would start to lend to small businesses, and the economy would wake up again.
All parties remained quiet about this ultimate evidence of Labour's economic failure because they did not want to inherit a completely destabilised economy - and frankly, all were guilty of stoking the stupidity that charged on with the "fairy money" policies that took a reasonably healthy 1997 economy and turned it into a global basket case as the result of ruthlessly spending other people's money in order to buy three elections.
It is of course the same as a company issuing more shares without any covering payment or assets, and so dilutes the worth of each share accordingly. The UK's last round of QE was in order to prevent banks going bust after the casino asset bubble of the last Labour government finally expired in 2010. Not only had the government run out of other people's money to spend, the banks were completely over committed to loans to buy those bubble assets and RBS was apparently hours from failure.
So the government invented money with which to bale out RBS and the rest, and hoped that everyone accepted that the alternative was just too horrible to contemplate and that dissent would remain muted. Part of this handout was sweetened for the public with dishonest promises that banks would start to lend to small businesses, and the economy would wake up again.
All parties remained quiet about this ultimate evidence of Labour's economic failure because they did not want to inherit a completely destabilised economy - and frankly, all were guilty of stoking the stupidity that charged on with the "fairy money" policies that took a reasonably healthy 1997 economy and turned it into a global basket case as the result of ruthlessly spending other people's money in order to buy three elections.
The banks took every penny and used it to shore up their catastrophic balance sheets, and hardly any was loaned to businesses to create economic activity. Ironically, banks argued that the businesses were looking like bad risks - thanks to the economic climate brought about by their willingness to lend to bubble assets over the previous 13 years. And when failures occurred in companies starved of capital, they said "told you so".
So the net effect is no economic stimulus, just bankers able to look forward to fatter pensions for longer? Plus ça change, more of the same. So then, how about something truly radical? I offer you "QE for the rest of us" - it's the way ahead.
In a nutshell: every UK citizen over the age of 35 who has been resident for more than 20 years to get a one-off "payment" of £100,000. That's 35 million people, so a modest £3.5 trillion.
Which doesn't sound a lot if you say it quickly, does it?
The devil is of course in the detail. Those receiving the cash will need to pay off all their personal debt first - in fact, this will need to be deducted at source to avoid temptation. Outstanding personal debt stood at £1.424 trillion at the end of April 2013, but that's still £2 trillion into the active economy, and with all that debt paid off, the banks will be so well funded that they can be fundamentally reorganised and returned to their proper roles as servants of the people and their businesses - and maybe told to open branches with devolved local responsibility once again.
We might as well take the opportunity to re-establish the Post Office and a UK-owned logistics industry properly once again, and tell them to devise a better PayPal. Why let Fedex, UPS and TNT have it all to themselves now the world of commerce is almost entirely about fully integrated payment/warehouse/delivery coordination?
Those prudent folks who have been hammered recently with negligible interest rates on savings (especially the elderly) will be big beneficiaries. The age break of 35 means that families are going to be big beneficiaries, and will be able to fund their kids' long term education. However, all private education would have to be brought into a new (superior) state system, and operated on merit, not ability to pay.
The 14m people over 60 will be encouraged and assisted to invest their windfall in establishing family businesses. And it also marks the opportunity to address the sacred cows of the NHS and deal with the cost implications of the elderly. As part of the duty of the "âgées riche", these folks can now be very reasonably expected to contribute in some way to their retirement care costs. Maybe some form of "health bond"?
Eeek! The value of £ will slide - at least initially until the brilliance of this plan emerges - so we had better get fracking to keep energy costs under control. UK gas reserves are now estimated to be at least 1,300 trillion cubic feet. At $7 per 1000 cubic feet, that's $9 trillion, or £6 trillion. So it seems arguable that this "QE for the rest of us" project has more than adequate "asset backing".
But just think of the excitement and anticipation that such a bold strategy will engender - and it's up to politicians to harness the momentum and good will. Which may be the fatal flaw in the plan, since our present breed of "bubble bred" politicians does not seem to have a clue about building a good old-fashioned indigenous economy, instead preferring to smooze with the likes of Google and Bill Gates..
And what about the envy factor from those who miss the cut? Very tricky. Many under 35s will be expected to benefit from their parents' windfalls. However, EVERYONE will benefit from our utterly rejuvenated economy that will be the talk of the planet.
Abuses will need to be very carefully assessed and rules with severe penalties be devised for those who cheat the spirit of the plot. One obvious one will have to be VAT on luxury import purchases hiked to as much as 50% to discourage spending splurges. Maybe two classes of money are required - with the QE fund only being spendable/investable in the UK.
The adoption of globalisation, sold by its slick advocates to gullible politicians has been a demonstrable economic failure - if not a disaster. The UK has no viable "new economy" behemoth to match Google, Facebook, eBay, Paypal, Twitter or Amazon; and doesn't even get taxes on the profits the aforementioned contrive to keep offshore. So not a lot to lose, eh George?
The EU wouldn't like? Well, so what? The UK will do what it is best for the UK ... at last. Including leaving the EU to work out its own Euro issues.
The EU is now a colossal irrelevance that was contrived in an age before globalisation and pervasive networks. It provides handy markets for Germany in particular, but generally hangs like a millstone around the neck of the world in 2013. Moreover, the EU Commission only appears to be a combined rest home and fat sinecure for the failed quangoistas and compliant politicians of the "bubble economy age" like Peter Mandelson, Chris Patten, Cathy Ashton, plus of course, Neil and Glenys Kinnock.
And what if every other country likes what they see, and decides to follow suit? You know what, the US economy in the times of Clinton pretty much did what I am suggesting, but rather more "dishonestly". However, Clinton's great mortgage give-away ended up in the hands of manipulative bankers as toxic debt - and was largely handed to democrat voters who used it to buy over-valued property.
Could everyone follow our blueprint to regenerate their home economies - suitably adapted to local conditions? As long as the "eased money" stayed within the local country economies, why not? To some extent, this is how a number of economies (eg Egypt) operate with a black market with a very different "unofficial" exchange rate for US$, and a tightly controlled local currency.
Who would be the biggest losers from this scheme? Almost certainly the deeply vested interests of global economic manipulation that pull the levers behind the scenes (the so-called promoters of the New World Order) - and that are high on the list of targets of the anti-globalisation "occupy" protests.
Countries with "honest" wealth funds invested in our diluted assets like Norway might have an irritated sense of "prodigall son" if the UK is allowed to get away with it. But most such energy based wealth funds have arisen from accidents of birth, and are controlled by assorted despots that we are presently obliged to be nice to. So we had better get fracking, and also hope that the LHC in Cern produces an answer to creating cold fusion energy for when that runs out in 40 years; and then we are all home free.
However, all will soon enough understand the benefits for their investments in a UK economy growing at a healthy 10+%.
But if this all goes horribly pear shaped, there is the one remaining option. HM the Queen seems to own copyright on her English Language. Can you imagine American IPR lawyers allowing anyone to get away with the type of breach copyright that HM has suffered all this while? Neither can I. US behemoth Getty Images try and charge anyone inadvertently using one of their images on a web site as much as £4k, so maybe I am underpricing this deal.
Anyway, we'll charge the US $10 trillion in back royalties and penalties for having stolen (and mutilated) HM's intellectual property in 1776. In fact let's do that as well as the QE. In for a penny, in for £135000000000000.
PS:
The 100 Euro note!!! It is the month of August, on the shores of the Black Sea. It is raining, and the little town looks totally deserted. Times are tough, everybody is in debt, and everybody lives on credit. Suddenly, a rich tourist comes to town. He enters the only hotel, lays a 100 Euro note on the reception counter, and goes to inspect the rooms upstairs in order to pick one. The hotel proprietor takes the 100 Euro note and runs to pay his debt to the butcher. The Butcher takes the 100 Euro note, and runs to pay his debt to the pig grower. The pig grower takes the 100 Euro note, and runs to pay his debt to the supplier of his feed and fuel. The supplier of feed and fuel takes the 100 Euro note and runs to pay his debt to the town's prostitute that in these hard times, gave her 'services' on credit. The hooker runs to the hotel, and pays off her debt with the 100 Euro note to the hotel proprietor to pay for the rooms that she rented when she brought her clients there. The hotel proprietor then lays the 100 Euro note back on the counter so that the rich tourist will not suspect anything. At that moment, the rich tourist comes down after inspecting the rooms, and takes his 100 Euro note after saying that he did not like any of the rooms, and leaves town. No one earned anything. However, the whole town is now without debt, and looks to the future with a lot of optimism. And that, ladies and gentlemen, is how the British Government is doing business today. |
