The gaping hole in the understanding:
I will make two points. One is that coronavirus is already paid for. It’s being paid for by money creation, albeit imperfectly via QE, and by people saving with the government. What that means is that ‘how is this going to be paid for?’ debate has to really be about something else, which is ‘how are we going to reverse QE?’, the reason for doing which is unknown, and ‘how are we going to force people to save elsewhere?’, which, again, is a bizarre question. Why would we want to punish the
economy to achieve that goal?
Well, why have we done it through QE? Because it is, potentially at least, reversible. As the Federal Reserve did reverse some of it.
If we invent money then go spend it then the only way we can take that money back, if inflation arrives, is through taxation. That’s pure MMT and should be obvious to an MMT guru like Snippa.
OK, so why didn’t we do that? Why go through this bonds and QE and all that? Because it is potentially reversible. If inflation turns up then we can sell the BoE bonds back into the market, collect the money and destroy it. This gives us a second – and quite possibly more useful – tool to beat the inflation resulting from money creation. Reversing the creation of the money.
Now, whether we will do that is another thing. But what is the reason to reverse QE? We’re getting – note, this is if we do – inflation as a result of the money creation. So, let’s reverse the money creation.
The reason Snippa finds this so difficult to understand is?
Well, we know actually. It’s because he wants to insist that QE never will be reversed, so that he can say that the national debt isn’t all that large. In pursuit of being able to say that he’s willing to ignore the entire point of doing it as QE in the first place.