Many governments and central banks in more advanced economies, anxious to avoid the mistakes made during the global financial crisis, have taken pre-emptive action in two primary ways: first, by organizing massive income transfer programs to support the individuals and businesses most adversely affected by the pandemic, and second, by lowering interest rates – often to levels close to zero – and making it clear that interest rates will stay low for some time.
To which, apparently, the solution is more tax:
Third, to address the issues arising from this we need an urgent programme to increase the taxes on wealth – not because the government needs the money, which it does not – but because this inequality is deeply harmful to society. I have set out such a programme, here.
Hmm. Well, if low interest rates increase wealth – which they do, those assets which produce higher yields rise in value – then why not reverse this by increasing interest rates?
Something we’re likely to have to do soon enough given rising inflation. We’ve even got a simple way of doing this, just sell the QE bonds back into the markets and cancel the extra money that QE created. This is, after all, why we did the stimulus as QE in the first place.
True, this fails the test of a righteous policy, which is always MOAR TAX, but then the correct answer in real economics is not always MOAR TAX.