Anatole Kaletsky, the well-known journalist with the Economist and Financial Times, is advocating Quantitative Easing for the People (QEP) over in his Reuters blog today.
The idea is to give every household $6,000 or £6,500 per person to increase consumption and spending.
The amounts are based upon the fact that these are the figures central banks have spent on QE with the banks, and it has failed to create the economic stimulus that they hoped for. Therefore, by giving the cash directly to the people, it is far more likely to succeed.
He cites four objections to such a program.
First, it wouldn’t work due to consumers paying down debt or hoarding the cash. That’s a good thing however, as it would deleverage household debt from 83% of US GDP to 70%.
Second, it would work too well and create inflationary pressures. That’s a good thing though, as we need inflationary pressure right now.
Third, it would corrupt society and they’d expect QEP every time governments have problems. That won’t happen though as QEP would create too high an inflation if it continued forever and make money worthless, so this is just a short-term thing.
Finally, that it seems too good to be true. He argues it is, and its time has come.
I would argue a different way however.
For all the interest in this program, it’s not a new idea.
It’s already been suggested by the Liberal Democrats.
It had a slight difference of approach, but the Lib Dems idea was to give every citizen shares in our banks, rather than privatise them again and keep the cash.
Effectively, the £66 billion invested by the government in RBS and Lloyds in 2008 would be redistributed back to all the people.
Like Kaletsky’s idea, it sounds laudable on first glance.
Then the practicalities arise.
All citizens get some cash or shares?
Does that include prisoners?
Do you allocate based on the severity of the crime, e.g. do murderers and rapists get cash and shares?
Oh, ok. Not prisoners then.
What about people on benefits?
Do the unemployed and disabled get the same as those who are taxpayers and workers?
Oh, ok. Not the benefits people then.
What about pensioners?
They are no longer generated taxable income?
Oh, not the pensioners then.
So it’s just working people who pay taxes?
And they all get the same each, or should it be based upon how much tax they pay and how much they earn?
As can be seen, interesting idea but not a simple one although I’m sure we will see more of this type of idea coming downstream as the QE and banking system fails to resolve our economic issues.
My own plan?
Quantitative Easing for Chris.
Give me all the cash.
I’ll find a good place for it.
No, on a serious note, the critics are saying that whatever the government does through the banking system is failing. First it was QE and now it’s specific impetus for distributing funds to small businesses.
The Bank of England’s Inflation Report released this week indicates that the £80 billion "Funding for Lending" scheme, which the Government unveiled last month, could end up boosting banks' profits rather than channelling credit to hard-pressed businesses.
So what should be done with these billions if not given to citizens as cash or shares or to banks as impetus for growth?
Why not offer it as tax relief.
I would far rather see the billions that Kaletsky wants to give as cash and Williams as shares be given to Britons and Americans as tax relief.
That way it would be proportionate and overcomes the arguments about prisoners and scroungers.
Either that or QEC.
Both work for me.