It’s fashionable among the economic scribes to deride Corbyn’s advocacy of what he calls People’s Quantitative Easing (PQE) as though it were somehow illiterate. In fact it is an entirely sensible policy. Conventional QE operates via the central bank buying bonds in the financial markets, thus transferring newly-created money to banks, hedge funds and other investors. The effect is therefore to boost the prices of bonds, shares and other assets, making the rich richer. The theory then is that this wealth effect should stimulate the economy as the investors who have been enriched by selling assets at high prices to the Bank of England spend some of their profits on the high streets or employing servants or investing in new businesses. It is clearly a very indirect and extremely inefficient way of stimulating an economy. Both Tory and Labour governments have spent £375 bn in using this device with very little to show for it since we still have the slowest recovery for over a century.
A better alternative – though not the best – would be ‘helicopter money’. Or slightly more realistically, send cheques of £20 a week to every man, woman and child as a sort of reverse poll tax. Technically, if £375 bn were spent this way, these cheques could continue to be sent out every week for nearly 6 years since £375bn is roughly £6,000 per head when equally divided among the 64 million people of Britain. That would indeed be a far, far quicker way of stimulating economic activity. Since neither dropping money from helicopters or sending cheques every week to every household in Britain is very practical, a third alternative is to bypass the banks and, after full and detailed consultation with the CBI ansd TUC, invest directly in key industrial or manufacturing projects.