January 9, 2009

Quantitative easing, monetary reform and green credit

In the current financial crisis it has been proposed that the Bank of England print money to lubricate the economy. This is referred to as 'quantitative easing'. This proposal has received a lot of criticism, dubbed in the press as 'helicopter money' with pictures of bankers throwing money for people to spend to avoid recession. The allegation is such action would devalue the pound, with Zimbabwe's currency collapse and hyperinflation cited as a cautionary tale.

But, as I have raised here, monetary reformers propose something very much like this. They point out that new money, required as the economy expands, is currently created by commercial banks at a profit as interest-bearing loans. They propose that central banks take over the role and provide the money to governments to spend into circulation through investment in capital projects or by funding tax cuts.

Monetary reform proposals didn't do well enough in the last annual vote to stay in the process - I think due to the apparent contradiction between the claim that commercial banks create money out of nothing and credit drying up. See:
http://www.simpol.org.uk/forum/index.php?topic=7.0

I've been looking for those who know more about this subject than I do to explain more about quantitative easing and how it links with monetary reform proposals. So I was very pleased to receive the following email from Barbara Panvel and links from Sabine McNeill of the Green Credit campaign, which I am off to explore.

I hope that the monetary reform proposals come back stronger and clearer. Anyone interested in working up a proposal can do so in the 'work in progress' of Simpol's online forum. See:
http://www.simpol.org.uk/forum/index.php?board=32.0

---Email from Barbara

Will the opportunity offered by the current dialogue about ‘quantitative easing’ - a term first noticed by me a couple of months ago - be taken by people working on the Green New Deal?

The definition of quantitative easing given by those with a vested interest in opposing such measures is ‘printing money’ and warnings are given citing the example of Zimbabwe.

Philip Stephens, associate editor of the Financial Times, does not agree, describing printing money as ‘the new prudence’ now that the Washington consensus has been fractured.

However, printing and distributing banknotes – once suggested by Milton Friedman and the Fed's chairman, Ben Bernanke - is not on the agenda of most monetary reformers.

MP Austin Mitchell has for years consistently and constructively proposed to spend fiat money, issued electronically, into circulation in a focussed way, meeting unfulfilled public needs such as improving transport, education and health provision – and the range of measures advocated in the Green New Deal.

In November 07, his EDM 265 called for a policy of using publicly-created money to finance carbon neutral measures and conversions which could be adopted to create additional economic growth and recommended the Treasury to use its powers to create non-interest bearing money to fund activities to combat climate change.

The real issue is not one of bank-notes versus virtual money but of the uses to additional ‘liquidity’ could be put: as Andrew Lydon once pointed out, money issued in this way could be used for good or ill.

To date, Alistair Darling has not ruled out quantitative easing, so I hope that readers will press for the funds released to be used in the interests of the ‘real’ economy and the environment - and not to give further subsidies to the arms trade or to build incinerators and nuclear power stations.

---email ends

---Links provided by Sabine McNeill

Money Supply or Public Credit Petition
http://www.gopetition.co.uk/petitions/stop-the-cash-crumble-to-equalize-the-credit-crunch.html
Parliamentary Scrutiny via the Treasury Select Committee.

Money as Debt also known as Credit
http://moneyasdebt.wordpress.com/

Green Credit for Green Purposes
http://greencredit.files.wordpress.com/2007/01/green-credit.pdf
our submission to the Committee’s Inquiry into the Stern Report

Green Credit campaign
http://greencredit.org.uk/

In the Spirit of the Forum for Stable Currencies
http://www.forumnews.wordpress.com/

Forum for Stable Currencies
http://www.forumforstablecurrencies.org.uk/

Expanding Dr. Yunus' Sphere of Influence
http://yunusphere.net/

1 comment:

Sabine K McNeill said...

Dear Nizam

I commented on 16 explanations re quantitative easing by the Bank of England on this blog post http://bit.ly/cVPxOJ

And I fear that "they" will use SDRs as the basis for the one world currency with which they'll attempt to enslave us for good.

Trust me though that I'll do my best to counteract this trend!!!

With kind regards,
Sabine
Organiser, Forum for Stable Currencies
http://forumforstablecurrencies.info