The shadow chancellor Chris Leslie said Corbyn’s plans to fund infrastructure investment by printing money would “push up inflation, lending rates, squeeze out money for schools and hospitals and mean spending more on debt servicing”.

Looks like Corbyn has swallowed Ritchie’s Green QE hook line and sinker.

The problem, as ever, being that Ritchie doesn’t understand, refuses to understand, that the point and purpose of QE is that it is reversible. And this therefore isn’t QE, this is simply printing money to spend.

We really might see Baron Murphy if Corbyn wins.

16 thoughts on “Corbynomics”

  1. QE-to-spend is reversible, too, as long as the government has the ability to levy taxes. What matters is whether people believe the QE is permanent or not.

    Japan seems to be showing that it is quite hard to convince people that they won’t have to pay the money back at some point.

  2. Yep, they’ve even told us how they will do it. As bonds mature they currently purchase more to maintain the stock. In the future, at some point, they’ll stop purchasing to maintain the stock. Thus, as bonds mature, the govt has to sell new ones into the market to roll over that debt. This is QE reversal.

  3. What’s wrong with the Government creating money to spend ?Better than the banks creating money and charging interest on it.Then pumping the newly created money into property bubbles.
    Labour, as an opposition, should be saying :” Banks creating money isn’t working”.

  4. DBC Reed,
    Is there a direct link between “banks creating money” and property bubbles? I don’t see evidence for that.

    Neither do I see evidence that “banks creating money” is a generally a bad thing. Banks being run badly is a different subject altogether.

  5. DBC Reed,

    Re connections between private money creation and property bubbles, privately created money (i.e. loans by private banks) were expanding rapidly during the property boom that preceded the 2007/8 crisis, not of course that correlation proves causation, of course.

    Whether “banks creating money” is good or bad, the arguments are complicated. I wrote a book on the subject where there’s a summary of the arguments near the start. See:

    https://pdf.yt/d/J3al4g-8KAPvzA24

    I’ve since firmed up the arguments against private money creation, which will appear in the 2nd edition, if I ever get round to that.

  6. @JC !
    Perhaps you think banks creating money and passing it off as ” lending” is not fraudulent in principle. In Iceland they call it counterfeiting. Even on a pragmatic basis, it isn’t working.
    If you haven’t noticed that cheap money pushed out by the banks is inflating property prices, ultimately land prices , then there is no point in discussing things with you.

  7. Money was cheap because the UK base rate set by the bank of england excluded house prices from the basket of goods. If rates had been 1 or 2 points higher the property boom would have been cooled down.

  8. DBC,
    Points you don’t seem to be considering:

    1) Banks have been “creating money” for a very long time.
    2) But, property prices have gone up and down.

    So there must be other factors at work, and that are more important.

    Further, bank profits, as a %, were good but not extraordinary. Therefore, there must be significant constraints on “creating money”.

    Where is the fraud?

  9. Murphy on Twitter:

    “Jeremy Corbyn has acknowledged that I am the author of much of his economic policy. Not a single journalist has called me about it”

  10. “1) Banks have been “creating money” for a very long time.”

    Correct me if I’m wrong, but I understand that their capacity in this regard has significantly increased in recent decades?

    “2) But, property prices have gone up and down.”

    But mainly up. Very mainly. And very Uply.

    “Further, bank profits, as a %, were good but not extraordinary. Therefore, there must be significant constraints on “creating money”.”

    Obviously so. And the main one would be the ability of the ordinary folk to keep up the repayments. Parasites have to keep the host alive, after all.

    Plus, their profits before bonuses are pretty special. Though I don’t know who much of that bonusable profit can be linked back to mortgage lending.

  11. Any money created without a corresponding increase in goods and services is inflationary. More money/no more G&S is bad news.

    “As bonds mature they currently purchase more to maintain the stock. In the future, at some point, they’ll stop purchasing to maintain the stock. Thus, as bonds mature, the govt has to sell new ones into the market to roll over that debt. This is QE reversal.”

    So they are buying their own bonds (with money neither tax nor borrowed) but when they stop doing so the state then has to sell to private mugs? And if the private mugs recognise that the state has inadequate resources to pay off the bonds it sells them other than in funny money? And don’t keep buying? How is that getting rid of the “money” they already created to buy their own bonds–unless that money is just an electronic fiction and the state is just giving themselves said bonds. Which would defeat the entire raising-more-money-to-spend idea of govt bonds in the first place.

  12. Though Gang,
    But why the need to find borrowers?

    Once they’d run out of them, couldn’t they just use their newly created money to buy things?

  13. I’ve said it before and I’ll say it again – if banks can create money, how come so many of them go bust ?

  14. Corvus Umbranox

    I’m only an interested amateur, but my guess, in answer to your question is:
    1. creating money = fractional reserve lending i.e. there is a condition attached to the creation of money, viz deposit base and permitted leverage..
    2.if a bank leveraged 40:1 (the level apparently of UK/EU banks in 2008) makes a 10% loss on its speculations (aka investments) then there is no “reserve” left
    I’m unsure about the connection between equity and “reserve”

Leave a Reply

Your email address will not be published. Required fields are marked *