For those of you out of the loop, "Quantitative Easing" or "QE" is the
tactic of U.S. central bank ("The Fed") to answer our current shortage
of aggregate demand. The shortage of such demand, as any Keynesian will
tell you, leads to economic downturns, and we find ourselves in one now.
But what is QE? Essentially, the Fed purchases financial assets to prop up their prices. And financial assets are the locus of any inflation in the current economy.
In theory, QE makes cheap money available to lend to the real economy, thereby spurring growth. Incidentally, it's pretty obvious that "growth" is not always a positive thing, but that's another subject. In current circumstances, it would lead to better economies, more jobs and at least *theoretically* a better balance of the wealth distribution. So the 24/7 propaganda...er, I mean "marketing" says QE is a method to revive the ("Hard Working"[tm]) Middle Class in America.
But cheap money does not make banks lend. In fact it's roughly like pushing a string when it comes to the economy. It just gives banks money and reassures the plutocrats that their financial assets won't decline in value (like homes, gasoline, etc.). In other words, QE insulates the plutocrats from deflation. It also gives money to banks to engage in speculation rather than productive lending (and the volume of derivatives is once again rising).
So...why is deflation bad? Primarily because debtors must pay back loans with more-valuable dollars. In brief: it crushes debtors. For vulture capitalists, deflation is fine. Plutocrats don't borrow to keep body and soul together, and they get to pick up all kinds of assets cheaply. In fact that's why sociopaths like Pete Petersen push deflationary policies (i.e. "austerity").
Anyway, that's the state of play. A simpler, more effective solution to our economic troubles, and the unemployment that keeps wages low would be to give people money to pay off their debts, or to have the government provide a job guarantee (remember, they are not fiscally constrained).
That's right. Give money. MMT economist Steve Keen suggests a grant of $50,000 per tax-paying family. The money pays off debts first, then is available to spend. The Great Recession would end in short order. Another possible solution is one the Chinese are pursuing. They're raising government employees' pay 60%, in effect. Not perfect, but far better and more effective than QE.
The current high unemployment, low wages, deflationary environment is completely unnecessary, and QE is virtually impotent at stopping the suffering, unless, of course, you are a plutocrat.
Oh yes, and take note of how infrequently you'll hear of any alternative to QE and austerity in most media outlets. [crickets]
For more about this, read this description of how the European Union, far from learning from our bad experience, is about to embark on their own version of QE
But what is QE? Essentially, the Fed purchases financial assets to prop up their prices. And financial assets are the locus of any inflation in the current economy.
In theory, QE makes cheap money available to lend to the real economy, thereby spurring growth. Incidentally, it's pretty obvious that "growth" is not always a positive thing, but that's another subject. In current circumstances, it would lead to better economies, more jobs and at least *theoretically* a better balance of the wealth distribution. So the 24/7 propaganda...er, I mean "marketing" says QE is a method to revive the ("Hard Working"[tm]) Middle Class in America.
But cheap money does not make banks lend. In fact it's roughly like pushing a string when it comes to the economy. It just gives banks money and reassures the plutocrats that their financial assets won't decline in value (like homes, gasoline, etc.). In other words, QE insulates the plutocrats from deflation. It also gives money to banks to engage in speculation rather than productive lending (and the volume of derivatives is once again rising).
So...why is deflation bad? Primarily because debtors must pay back loans with more-valuable dollars. In brief: it crushes debtors. For vulture capitalists, deflation is fine. Plutocrats don't borrow to keep body and soul together, and they get to pick up all kinds of assets cheaply. In fact that's why sociopaths like Pete Petersen push deflationary policies (i.e. "austerity").
Anyway, that's the state of play. A simpler, more effective solution to our economic troubles, and the unemployment that keeps wages low would be to give people money to pay off their debts, or to have the government provide a job guarantee (remember, they are not fiscally constrained).
That's right. Give money. MMT economist Steve Keen suggests a grant of $50,000 per tax-paying family. The money pays off debts first, then is available to spend. The Great Recession would end in short order. Another possible solution is one the Chinese are pursuing. They're raising government employees' pay 60%, in effect. Not perfect, but far better and more effective than QE.
The current high unemployment, low wages, deflationary environment is completely unnecessary, and QE is virtually impotent at stopping the suffering, unless, of course, you are a plutocrat.
Oh yes, and take note of how infrequently you'll hear of any alternative to QE and austerity in most media outlets. [crickets]
For more about this, read this description of how the European Union, far from learning from our bad experience, is about to embark on their own version of QE
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