Alternatives: Quantitative Easing For The People

This is a post in our series on our suggestions for alternatives to cuts and austerity.
In this post we explain Professor Steve Keen‘s idea – Quantitative Easing for the People.

We all know that over the past 3 years, the Bank of England has printed lots of money to give to the banks, in exchange for their bad debts – £375bn in fact. This money was supposed to stimulate the economy – to shore up the bank’s reserves so that they would lend to business and help to drive the economy forward. In fact very little of that money has found its way into the economy as there is already too much private debt and little willingness to either lend or borrow more money. Quantitative easing (QE) has in fact only helped the richest 10% of people, who have gained an average of £322,000 in value of their assets as a result of QE.
With the economy continuing to stutter, and inflation slowing down (although still rising faster than wages), there is talk of more QE, perhaps another £50bn like in July.

Instead of quantitative easing for the banks, Prof. Keen says we should give it to the people instead – in the form of a debt jubilee, a move he has called “Quantitative Easing for the People”

Skip to 4:07 to hear Prof. Steve Keen talk about his idea of a debt jubilee:

So instead of handing money to the banks, where it will sit in reserves and benefit the richest, this money would be given to everyone. If we assume for the sake of simple maths that there are 50 million adults in the UK (which is probably about right, but I’ve not been able to find an accurate number for this, sure it must be available from the 2011 census somewhere), that would mean £1,000 each in the event of a further £50bn QE being created by the Bank of England.

That money would have to be used to pay off debts, and any money left over people would be free to spend as they wish. That would mean anyone in debt would pay some or all of their debt off, and have a reduction in their outgoings, leaving them with more disposable income each month, whilst people without debt would see a cash bonus that would probably be spent, directly increasing demand in the economy.

Prof. Keen says The broad effects of a Modern Jubilee would be:

  • Debtors would have their debt level reduced;
  • Non-debtors would receive a cash injection;
  • The value of bank assets would remain constant, but the distribution would alter with debt instruments declining in value and cash assets rising;
  • Bank income would fall, since debt is an income-earning asset for a bank while cash reserves are not;
  • The income flows to asset-backed securities would fall, since a substantial proportion of the debt backing such securities would be paid off; and
  • Members of the public (both individuals and corporations) who owned asset-backed securities would have increased cash holdings out of which they could spend in lieu of the income stream from ABS’s on which they were previously dependent.

To read more about this plan, click here and scroll down to the section titled “modern jubilee”

So as the Bank of England talk of more QE for the banks, you should be calling instead for QE for the people. £1,000 for everyone to pay down debt or spend if they are debt free. Money into the economy instead of the bank’s vaults, leading to increased aggregate demand which will give confidence to the private sector, creating jobs and growth.

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3 Comments

Filed under Alternatives to Cuts

3 responses to “Alternatives: Quantitative Easing For The People

  1. steve

    “richest 10% of people, who have gained an average of £322,000 in value of their assets as a result of QE.” ..yet
    “, you should be calling instead for QE for the people. £1,000 for everyone”

    what kind of nonsense is that?
    clearly, it points out the pro-capitalist nature of this guy and his ideas!
    and
    “So as the Bank of England talk of more QE for the banks, you should be calling instead for QE for the people.” – calling to each other? calling on the government?
    What does Prof Keen and his ideas mean for activists?

  2. Pingback: Birmingham Trades Council » Alternatives: Quantitative Easing For The People

  3. Pingback: Demonstration and Occupation Greets Labour Councillors Meeting To Discuss Cuts In Liverpool | Birmingham Against The Cuts

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