Saturday 28 July 2012

We are using Keynesian economics but giving the money to the banks instead of the people

By Dark Politricks

I saw an interesting interview with Simon Jenkins on This Week last week in which he described how at the moment we are stuck in a liquidity trap and the only solution we have is to print more money in the hope it sorts out the dying victim e.g the UK. As he said:
"the government would be better off giving the billions of pounds it plans to pump into the UK economy to the public in the form of a Christmas bonus." "The columnist damned the government plan to get out of recession, claiming "it's fraud, it's a scam, it's a lie".
However as the Bank of England enters phases of printing money - or quantitative easing as they call it, Simon Jenkins believes that they are giving the money to the wrong people i.e the banks.

He believes that instead of increasing the deficit by the Bank of England buying bonds from the banks and paying interest and all the other funny business our economy actually behaves like we should instead be giving the money direct to the people to stimulate demand in the dead economy before we suffer a lost 20 years like Japan.

Keynesian, yes, but he believes that although printing money could eventually drive up inflation - which we are doing already by printing money to give to the banks.

We should instead be printing it and giving it directly to the citizens and tax payers of the UK. The same people who are now paying for the mistakes of the bankers.

He believes that by doing so it wouldn't be adding to the national debt or increasing the deficit as it wasn't money being borrowed but printed.

By doing this demand in the economy will be created as the people will use the money to buy goods and services which in turn would help businesses who will start to invest and grow for the future.

Whether you like the idea of not what we have at the moment is a case of the government taking tax payers money as well as printing and borrowing it to hand it over to the same banks who caused the financial collapse of 2008 in the hope that they will in turn use it to help businesses.

In fact what these banks are doing are using the money to shore up their empty vaults to meet Basel Capital requirements that they must hold a certain percentage of money in their bank. The fact that nearly all these banks have no money and it's just one big stack of cards waiting to fall down as soon as a country defaults and can't pay back Bank A, who in turn cannot pay back Bank B who in turn asks the government for another bail out is irrelevant.

Anyone who knows how money is created knows that it is created through debt and new money is created every-time someone takes a loan out. That money is then multiplied and leveraged beyond belief even though it doesn't physically exist apart from digits in a computer database.

If there was no debt there would be no money - simple.

It's all one big ponzi scheme anyhow as we all know by now which is run by banksters who launder money for Mexican drug cartels, wide boys who fix Libor interest rates, and interchangeable politicians / bankers who move from one job to the other and then back again.

All as if there was nothing wrong with a politician developing banking policy that helps push millions of Brits over the financial cliff and then go off and work in one of the banks they created policy for once they are finally voted out of office.

Simon believes the politicians and those that demand we must be austere wince at the idea of giving money directly to people as it seems somehow vulgar. As if giving billions of our tax pounds direct to the same people who caused the mess so that they can carry on giving themselves huge wages and bonuses isn't somehow!

So if we are already using a Keynesian economic policy that is being masked as an Austrian one through the use of the words austerity, the cutting of  public services, and all the other spending cuts that the millionaire front bench don't rely on then why don't we try to stimulate demand by giving the money to the people rather than the failed banks and businesses?

We could even tailor this arrangement so that it doesn't seem so "vulgar" by declaring that the money is a once off (or yearly) dividend to all tax payers who helped bail out the banks. 

Banks we basically own anyway. The money could be in the form of a special coupon or voucher that was only redeemable in this country (to stop people putting it in offshore bank accounts or saving it in UK bank accounts).

The voucher would be accepted in any UK based shop or business as legal tender and that company would then be able to redeem it for cash if they so wished from the Treasury by taking it to a bank or a special government office.

To stop people just turning up at banks and transferring the coupons to cash there would be a stipulation that only businesses could redeem the vouchers and only as long as they had a receipt showing the goods or services purchased with said voucher.

Other ways could be created to prevent fraudulent black markets transference we Brits are so good at.

Also we could have a "double the value" scheme in which if  the holder of the coupon bought goods made in the UK (not in China with a made in UK sticker on it!) then they would get the item, good or service at a discount. This would help stimulate the UK manufacturing industry.

Obviously this would only apply to tax payers and not people on the dole or those who have no intention of ever working.

Different sizes of voucher would be created just like paper money so that change could be given in other vouchers and there would be a "use by" date of one year to ensure it was spent within a certain time frame. It would basically exist like a dual currency alongside the existing fiat one we call the pound.

You might not like the idea or the theory for many reasons including it's Keynesian nature but we are already in a double dip recession with no hope of growth on the horizon and a growing national debt due to all the dole money having to be paid out to the public service workers the Tory/Lib Dem coalition have sacked.

If they somehow expected the private sector just to zoom in and suck up all these workers they were poorly mistaken.

Our chancellor George Osborne has failed in what he set out to do - grow the economy and cut the debt so we need some kind of plan.

Giving money to the banks has failed so why not give it to those of us who have basically saved the country anyway?

If 20 million or so people all spending a few billion pounds in the UK economy this year doesn't help it grow at all then we are truly screwed. It's only an idea but one which few people seem willing to consider.

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