Not content with helping people avoid tax, fiddling Libor, manipulating foreign exchange markets and helping crash the world economy, one of the big mouthed idiots at the top of HSBC is now expressing views on economics. You might as well listen to a chimpanzee on the subject.
Stephen King, HSBC’s chief economist thinks governments have run out of options for imparting stimulus because interest rates are near zero. His views there are much the same as Lawrence Summers’s “secular stagnation” idea.
As I’ve pointed out before, if you read the small print, it’s not really clear that Summers’s SS idea consists of anything remotely coherent. But if HE IS saying anything, it’s the above idea that governments are near out of options.
Anyway, the flaw in the above King/Summers nonsense is that even if interest rates are at zero, there is absolutly nothing to stop the state simply printing money and spending it on the usual public sector items: health, education, etc. Or if a right wing governemnt is in power, it can use the extra money to cut taxes, which will increase consumer spending. The latter is not as PREDICTABLE a method of creating jobs as public spending. But never mind: if a right wing party is elected to power, it is fully entitled to do what it was elected to do.
The Stephen King message, i.e. “There’s no money – we’re knackered” is unfortunately shared by many others. It’s complete nonsense.
Now there’s a teensy problem there as follows. Over the last three years or so we’ve had government borrow money and spend it with bonds being given to creditors, and with the central bank then printing money and buying back those bonds (QE). Now that all comes to the same thing as “print and spend”. So unbeknown to the chimpanzee – I mean Stephen King – his dreaded helicopter option has ALREADY BEEN IMPLEMENTED, and big time.
This is the end of civilisation as we know it.