Jeebus, he’s starting to froth now

This is the radical change that ensures that there is more money in the system. We have already done this once. We made £375 billion of quantitative easing in the UK to effectively bail out banks and not a single penny was charged to the taxpayer for doing so. Banks make money out of thin air. We can have just as much of it as we like. And creating £375 billion of it – which reduced the national debt forever by that same sum although all politicians refuse to acknowledge it despite the fact that this amount of government debt is now owned by the government itself and so due to no one – did not create inflation. We do, in fact, have almost no inflation at all and no risk of it.

QE was not intended to bail out the banks and did not bail out the banks. Banks were negative holders of gilts before the BoE started to buy gilts. Ritchie’s spouting nonsense. QE has not reduced the national debt forever. BoE is quite clear about it: at some point they will stop replacing maturing bonds and the debt will return to the private sector. Finally, QE stopped deflation. Which is, of course, to say that it caused inflation.

And people are buying monetary policy from this idiot?

Firstly, he will borrow to invest and to show he has done so this borrowing will be through a national investment bank that makes clear the accountability for the funds it pouts to use. The commitment should be to invest as much as is possible to use up the capacity of the UK to build for its future. This is the real way of making sure the next generation do not lose out. Nothing less will do. And he will acknowledge that financial markets are queuing up to let him do this. He will start small with new streets of houses and not HS2s or major rail line electrification. That way things get going quickly. And he will train people along the way so that bigger projects that might follow. Vanity will not come into this. But every constituency – whoever it voted for – will.

There’s a shortage of brickies and other construction workers. So, err, what capacity?

He will run a QE programme – at least £70 billion and maybe more for the next five years if need be……that might at best deliver the inflation we so desperately want of maybe 3% a year.

That’s, err, fascinating. Something roughly akin to the old M0 is notes and coins in circulation. Which is £70 billion or so. Reserves are rather larger, £350 billion or so. Not sure which is the most appropriate one to use to compare with QE being spent directly into the real economy. But the idea that money supply, base money supply, will rise 100% to 500% over 5 years and deliver inflation of only 3% pa does sound a little unlikely really.

There’s a very small and very evil part of me that would like to see this all actually happen. Just so people will have an inkling of what a bad policy suggestion it is.

17 thoughts on “Jeebus, he’s starting to froth now”

  1. “Banks make money out of thin air. We can have just as much of it as we like.”

    as they did in Zimbabwe. They have colossal amounts of money. So much in fact that they have wallpapered all of their rooms with it and still have loads left over.

  2. ‘I have to admit I am still always taken by surprise to see me referred to as Prof Murphy’

    Unusually, I think this is something we can all agree on.

  3. There’s also a part of me who wishes policies like this one, green policies, open borders etc were implemented just so people could see the stupidity in real time. Ideally, if these policies could be inflicted on the people who support them, that would be perfect.

  4. So this morning’s stump hole is the ‘money grows on trees, and we can have as much of it as we like’ one. I expect tomorrow’s will be the ‘Taxes on everything must go up to pay for more government spending’ one.

  5. Firstly, he will borrow to invest and to show he has done so this borrowing will be through a national investment bank

    Saying it is ‘investment’ twice makes it so! This is cargo cult economics.

  6. I wonder if any of his students have started to investigate transferring to different courses yet, given that a reference in your CV to a degree module taught by Murphy is probably about as helpful to success in the jobs market as dropping a loud smelly fart in your interview.

  7. “Banks make money out of thin air” takes turns on his blog with “tax is just giving back to the government what is its anyway because it made it”.

    Go figure.

  8. Taking Harry Limes idea a bit further, I’d like to put the entire Tory and Labour leaderships, plus Murphy, and strand them on an island.

    The island would have supplies of food and water buried at random locations.

    When you returned in 100 days, you’d find them all in a group, dead of starvation, having expired while conducting their 35th policy meeting….

  9. Surreptitious Evil

    They won’t have got as far as policy.

    They’ll have died failing to work out how to select the focus groups.

  10. “There’s a very small and very evil part of me that would like to see this all actually happen. Just so people will have an inkling of what a bad policy suggestion it is.”

    I often think this, but the bad outcome will simply be blamed on the Americans or suchlike and off we will go again in another generation. An economic groundhog day.

  11. “They’ll have died failing to work out how to select the focus groups.”

    They won’t even have done that. They would have eaten each other and not bothered with the food.

  12. Surreptitious Evil

    I often think this, but the bad outcome will simply be blamed on the Americans or suchlike

    In the past, known as the Cuba Gambit, but with the deliberate modern leftist ignorance of C20 history after WW2 (Vietnam excepted) now known as the “Venezula Explanation”.

    It’s merely a political variation of the “No true Scotsman” fallacy.

  13. I think it was one of the ‘blokes’ (Costa Rica possibly) who said that Murphy’s blog was useful for students of logic as it was one of the places on the net where you could see virtually every conceivable logical fallacy deployed, often in one post and certainly within two days witterings ….

  14. “There’s a very small and very evil part of me that would like to see this all actually happen. Just so people will have an inkling of what a bad policy suggestion it is.”

    If only people would see what actually happened. From my experience even the worst policy will be claimed as a success. There are always suckers that believe the spin.

    It’s been 13 years since the Iraq invasion and an entire political party still refuses to admit that it wasn’t done well. Feel free to add you own examples.

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