Mitchell, B. (2015) “ECB should start funding government infrastructure and cash handouts“, Bill Mitchell Blog, 30 Μαρτίου.
I was a signatory to a letter published in the Financial Times on Thursday (March 26, 2015) – Better ways to boost eurozone economy and employment – which called for a major fiscal stimulus from the European Central Bank (given it is the only body in the Eurozone that can introduce such a stimulus). The fiscal stimulus would take the form of a cash injection using the ECB’s currency monopoly powers. A co-signatory was Robert Skidelsky, Emeritus Professor, Warwick University, renowned Keynesian historian and Keynes’ biographer. Amazingly, Skidelsky wrote an article in the UK Guardian two days before the FT Letter was published (March 24, 2015) – Fiscal virtue and fiscal vice – macroeconomics at a crossroads – which would appear to contradict the policy proposal we advocated in the FT Letter. The Guardian article is surrender-monkey territory and I disagree with most of it. It puts the progressive case on the back foot. What the hell is going on?
For those who do not have access to the Financial Times, here is the text of the letter:
Sir, The European Central Bank forecasts unemployment in the eurozone to remain at 10 per cent even after €1.1tn of quantitative easing. (FT View, March 25). This is hardly surprising: the evidence suggests that conventional QE is an unreliable tool for boosting GDP or employment.
Bank of England research shows that it benefits the well-off, who gain from increasing asset prices, much more than the poorest. In the eurozone, where interest rates are at rock bottom and bond yields have already turned negative, injecting even more liquidity into the markets will do little to help the real economy.
There is an alternative. Rather than being injected into the financial markets, the new money created by eurozone central banks could be used to finance government spending (such as investing in much needed infrastructure projects); alternatively each eurozone citizen could be given €175 per month, for 19 months, which they could use to pay down existing debts or spend as they please. By directly boosting spending and employment, either approach would be far more effective than the ECB’s plans for conventional QE.
The ECB will argue that this approach breaks the taboo of mixing monetary and fiscal policy. But traditional monetary policy no longer works. Failure to consider new approaches will unnecessarily prolong stagnation and high unemployment. It is time for the ECB and eurozone central banks to bypass the financial system and work with governments to inject newly created money directly into the real economy.
The Bank of England research we referred to in the letter was published on July 12, 2012 – The Distributional Effects of Asset Purchases.
The intent expressed in the FT Letter is straightforward.
Σχετικές αναρτήσεις:
- Terzi, Α. (2015) “Is the ECB sacrificing reforms on the altar of inflation? – QE and its impact on structural reform efforts“, Bruegel Institute, 13 Μαρτίου.
- Wyplosz, C. (2015) “ECB minutes: What they really tell us”, VoxEU Organisation, 02 Μαρτίου.
- Crook, O. (2015) “The ECB Should Stay Out of Politics“, BloombergView, 10 Φεβρουαρίου.