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The Case For People's Quantitative Easing

Frances Coppola

Great argument for People’s QE but needing one more step

Frances Coppola rightly criticises post-crisis Quantitative Easing programmes. The large-scale QE purchasing of government bonds mainly from pension funds and insurance companies amounted to £435bn in total in the UK economy and €2.4tn in the Eurozone. But the funds went primarily into banks reserves, and deliberately raised asset prices benefitting wealthier groups, without raising lower incomes and aggregate demand, or successfully reflating the economy. 

Far better would be People’s QE, ie directly funding the economy through ‘helicopter money’ for consumption, the financing of government deficits, and/or writing off consumer debt. Coppola discusses at length the fear that this could prove hyperinflationary, the ultimate counterargument being that any ‘People’s QE’ should only fund aggregate demand to the level of output GDP. She doesn’t show that deficient aggregate demand is inherent to high technology economies in which earned income is ever increasingly insufficient to fund consumer expenditure, so that a People’s QE becomes a regular policy requirement. She also doesn’t mention Modern Monetary Theory which claims that a sovereign state can issue money, in one variant creating debt which is balanced by credits elsewhere in the economy, or in a more radical variant without the need to sell government bonds or create debt, as is already the case with coinage.

Coppola stops short of entirely endorsing the obvious proposal for a People’s QE to be implemented by a universal basic income (p131) funded by ‘sovereign money’ (p121), claiming in each case that these are beyond the scope of her book. This is unfortunate as both appear an immediate potential consequence of her argument. If basic income funded by sovereign money were to replace household debt, and sovereign money also funded government expenditure, then the economy would avoid both crisis and austerity – a big prize indeed!

Geoff Crocker
Editor ‘The Case for Universal Basic Income’

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