Green QE — Is This the Worst Idea Ever?

I thought the Austerity Curve was mental. But the Green Party’s Green QE idea is beyond mental — it’s batsh*t crazy… They genuinely seem to believe you can create money out of thin air…

Green MP Caroline Lucas (Brighton Pavilion), who has welcomed the report, said:

“It is understandably difficult for people to get their head around the idea that the Bank of England could magic out of nothing up to £70 Billion of Green Quantitative Easing. Yet it has already e-printed £27 billion (around £4,000 for every man woman and child in the UK) in an effort to get increased borrowing to British business via giving the money to the banks. But this money has completely failed to reach small businesses in the real economy which urgently need support.

“The bankers have had their £275 billion chance. Now it’s time for the Bank of England to help create jobs, stabilize the economy, and support the environment through a package of Green Quantitative Easing. I will be calling upon MPs of all parties to support these proposals, and urging my Parliamentary colleagues on the Treasury Select Committee to raise the issue of Green QE when they next question Sir Mervyn King.”

Truly, it speaks for itself. Crazy, just crazy…

  12 comments for “Green QE — Is This the Worst Idea Ever?

  1. Feb 9, 2012 at 1:12 pm

    For anyone not quite able to articulate why they also feel uncomfortable about this, let me have a go at clarifying.

    Money and prices are economically essential for controlling the allocation of resources in a distributed grass-roots liberal fashion.

    If you have 100 people, 100 loaves of bread priced at £1, and £1 worth of savings per person then everyone can eat one meal using their savings. If you create another £100 out of nothing and give it to two or three of the people those people will be fat on £1 loaves by tea time. By the time trade moves the money around the system the price of the loaves has changed to £2, too expensive to be purchased from the £1 savings owned by any other person. In real terms, wealth has halved for most people. Some proportion of the 100 people in this example are going to go hungry in order to acheive the benefits enjoyed by the QE recipients (green businesses).

    Effectively Caroline Lucas is advocating stealing from poor savers and givng to rich, politically favoured businesmen. It’s it is irrational, ill thought out, and it’s theft. It is what gives “capitalism” a bad name, and should not be advocated by a barking lefist.

    After you’ve stolen all the savings, it’s also really confusing for anyone looking at the prices in order to decide what choices to make. The price of bread will have doubled, but you would be wrong to be going into the baking industry and start making more loaves if the price change is your reason. Longer term, it messes up the economy and will cause a boom and bust cycle in the baking industry.

    • Feb 9, 2012 at 3:11 pm

      Simon I very much like that explanation of QE. And it certainly would cause a ‘Baking’ Crisis…

  2. Feb 9, 2012 at 1:18 pm

    What makes it worse, is that the justification seems to be “well the bankers got some”. Urgh.

  3. Paul Marks
    Feb 9, 2012 at 2:20 pm

    Frederick Bastiat predicted this – not the “Green” angle, but the basic principle.

    Once government (or a Central Bank) starts to actively subsidize the rich (which is basically what “QE” is – money is produced, not “printed” perhaps but produced, and given to the banks and, via them, to wealthy and connected enterprises and individuals), then demands for the increased subsidy for everyone else become louder and louder.

    If it is O.K. to create more money and give it to the banks – why not create more money and give it to ME (and to YOU – and so on).

    Of course it is NOT O.K. to create more money and give it to the banks – but the establishment elite can hardly reply (reply to demands that everyone get given money) by saying that.

    I am of the opinion that the “end game” of this farce (not just in Britain – but internationally) will come soon.

    My guess is 2013 – at the latest.

    • Feb 9, 2012 at 2:42 pm

      The lesson of 2008 is that people should have the reasons why it is about to happen explained to them, in advance. If we leave it late, capitalism can be blamed.

      That’s a lot of preaching that needs doing.

      • Paul Marks
        Feb 9, 2012 at 2:59 pm

        Agreed Simon.

        If people do not know the truth then they will just believe the default position of the media (and so on) – and blame the collapse on “capitalism” and the “greedy rich”.

        Such books as Thomas Woods “Meltdown” do not really have British equivalents – and even in the United States the “mainstream” try and keep the truth away from people as much as they can.

        In Britain the supposedly “free market” Economist magazine will not even review free market books telling the truth about the government backed credit money bubble – indeed this magazine no longer even publishes money supply figures.

        First they vanished from the printed magazine, then from the electronic version.

        But then the American Federal Reserve says “money supply figures are not useful for monetary policy” (they actually try and justify their cover ups that way), just as American newspapers try and cover up their problems by preventing (via political influence) the publication of paid circulation figures (i.e. how many actual newspapers are sold).

        If one hides a problem – then it does not exist. This is the thinking.

        The hard left (rather than the soft left establishment of the Economist magazine, and the “finance economy” bubble people) are laughing at all this.

        They know (know as well as we do) that it will collapse.

        And that will be their chance.

        Within two years (by the end of 2013) the “Keynesian” establishment (the university economics department people, bankers and so on) will be finished.

        Then the death struggle will be between free market supporting people – and the Cong.

        The Marxists have not gone away – indeed, in some ways, they are more powerful in the cultural institutions of Western countries than ever before.

        If I was a betting man I would not bet much on our chances.

        Not even in the United States (where there are many more of us) – let alone here (where we are so few).

  4. Robert Searle
    Apr 13, 2012 at 9:20 am

    Green QE is an excellent idea…and yes, private unelected banks do create money out of thin air irrespective of whether it backed in full,or in part by anything valuable….

    My project may also be of interest http://www.p2pfoundation.net/Transfinancial_Economics

    • Apr 13, 2012 at 10:24 am

      Robert, in response to these observations we could a) program a computer to take on the role of economic dictator for the entire planet or b) stop banks creating money from thin air (or at least stop using that money).

      I would like to think, that a global system of ecomonic dictorship would be a step too far for the great majority of people to stomach, but regardless, b) is far less dangerous and much simpler.

    • Paul Marks
      Apr 13, 2012 at 9:40 pm

      Certainly banks can (by various complex means) end up lending out more “money” (credit money) than anyone ever actually saved.

      But a credit bubble is not a good idea.

      Boom-bust is not good.

    • Tim Carpenter
      Apr 15, 2012 at 1:47 am

      If you think banks “create money out of thin air” then try withdrawing it.

      Banks lend one money which one often immediately lends back to them (by having a deposit) so they still have money to lend on again. Even if one deposits elsewhere, one bank will nett off against the other as another bank borrower does likewise. If a bank has more lending out than deposits, it, by the very fact of mathematics, must either find hard cash to hand over the counter OR they have to find hard deposits at the Central Bank to hand over to the counterparty bank to which the withdrawal was electronically sent. Banks are not fools enough to take bank IOUs except in 1-for-1 exchange for their own.

      The most straightforward answer is to end the geographical monopoly over money and replace it with, not a GLOBAL monopoly, which some want and will be the systematic theft of us all, but plurality. Then the issue of what money is becomes a matter of the free market and bad banks trying to lend more than they have will be smoked out.

      • Paul Marks
        Apr 15, 2012 at 3:51 am

        True – what commercial banks (that do not have special magic powers granted by governments) actually create is CREDIT not money (and they are not the same thing).

        One of the most “nasty” laws of economics is that borrowing must be from real savings – so, for centuries, people have tried to find ways of borrowing more “money” than was ever really saved. After all people do not want their desires limited or even delayed – they want “it all” and they want it “now”.

        However, every credit money “boom” (every expansion of bank credit, lending, that does not come from real savings) ends in a “bust”.

        And getting governments (and Central Banks) involved should means the boom-bust is vastly bigger – and causes vastly more damage to the basic structure of an economy.

  5. Tim Carpenter
    Apr 15, 2012 at 1:54 am

    “But this money has completely failed to reach small businesses in the real economy which urgently need support.”

    Yes, and it will completely fail to reach where you want it to go, Caroline. While I would normally say “thank goodness”, that does not apply this time as it is MY wealth being diluted and handed to sticky-fingered snake-oil salesmen.

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