As I said a decade back

In my opinion this adds an important distinction to MMT. It is that not all debt is equal.

It follows that not all money is equal.

And that not all QE is equal either.

The latter I have known for a long time. It was the whole basis for my argument for People’s (or Green) QE back in 2010. The point I made then was that the behavioural, social and economic consequence of injecting money into the economy via banks was always going to be very different to apparently undertaking the same process through a state investment bank that invested in the real or productive economy. Hudson et al have now explained this in most convincing fashion.

Yes, quite so. Which is why we did QE the way we did rather than printing hundreds of billions in money and spending it directly into the real economy.

The inflationary effect depends upon the V part in MV=PQ of course.

The net effect of the difference between types of QE being that you can indeed print and spend directly on real things. But only in extreme moderation.

Print hundreds of billions and you’ve got to play those games with interest rates. Go spend that amount directly and you’re created a firestorm of inflation. Because not all forms of QE are the same.

And the thing is, last time he made his point, a decade back, I made this one too.

12 thoughts on “As I said a decade back”

  1. I have puzzled about this a lot. Apologists for hated Brexit, about to be dumped on a country already fighting to stay afloat, have claimed we should not count QE debt as debt. By these means you can claim the country is only 60% or so of GDP in debt and borrow lots more.
    (New Labour never above 35%…but they are all mad)
    It was of course clear why they would wish to engineer a consumer boom and make us pay for it later ( they are wankers) but I have been wondering all year why, if we can write off QE, should we not solve every problem the country has and buy ponies and ice cream as well?
    Why would it matter what the Chancellor says when fiscal conservatism was a meaningless gesture. Why should UK debt ever become junk when we can pick another fruit from the ever budding money tree Why not elect the biggest liar/spender in town …stiff competition there.
    So it seems to me to be crucial that QE is owed. Who it is owed to is secondary, almost all National debt was owed to British bond buyers when it was invented to pay for wars.
    Tims post seems to imply that the only difference between Mugabe and Osborne is V. Surely the crucial difference is between borrowing and inventing. You would not lend money to someone liable to pay you back in currency they made with a potato print and children`s paint.Same thing.

  2. Dennis, Geography Master and Pendant

    I have puzzled about this a lot.

    Next time, try thinking. The two activities are different, you know.

  3. Dennis, Bullshit Detector

    Tims post seems to imply that the only difference between Mugabe and Osborne is V.

    Actually, it does no such thing.

    But you keep puzzling…

  4. a state investment bank that invested in the real or productive economy.

    It wouldn’t though. It would squander it on whatever the unions, civil servants and loony activists wanted, not to mention rewards for actual bribery from favoured (green) organisations. It would by a vampiric leech on the real and productive economy, which prospers despite the attention of Murphy and those like him.

  5. Quite true Rob
    Rather like foreign aid which is spent rather than targeted
    State Investment Banks run by morons will spend rather than invest

    I quite like the way Newmania contradicted himself in 2 paragraphs up at the top there. If he gets that down to 1, he’ll be up there with his hero from ELy. And after all that puzzling about money and what you can do with it he’s still not registered what the EU is primarily about.

  6. “a state investment bank that invested in the real or productive economy.”

    Didn’t we have that in the 1970s in the form of the National Enterprise Board. And that worked out oh so well didn’t it?

  7. We’ve got one of those “investment” funds in NZ, sadly. It has been a tale of woe, where even its boosters struggle to justify it:

    https://yournz.org/2020/04/09/shane-jones-concedes-insufficient-jobs-created-by-provincial-growth-fund-repurposing-funds/

    But, hey, lots of people have got to have a good time out:

    https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12315587

    The really annoying thing is that *everyone* knew it was a boondoggle, apart from a few rube voters in the provinces that it was aimed at. All the parties and all the commentators knew exactly what would happen. It has thrown away money, mostly on political targets, and created barely any jobs.

    That the spud doesn’t know how these things work by now is not a surprise, but even for him it is quite a low point.

  8. Andrew C

    Hilarious link – I’m surprised the author is capable of turning a computer on but it does show the level of narcissism on the extreme Left. ‘Racism never sleeps’

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