Thursday, 15 October 2015
Obama on Peoples’ QE.
As I’ve explained a hundred times, the big problem with PQE (assuming relevant spending is on infrastructure, and that seems to be the objective) is that not many infrastructure projects are shovel ready. I.e by the time they get going, the recession may have ended, and worse still we might be in the middle of the next boom.
So it’s good to see Barak Obama repeating that point. As he put it, “Infrastructure has the benefit of for every dollar you spend on infrastructure, you get a dollar and a half in stimulus because there are ripple effects from building roads or bridges or sewer lines. But the problem is, is that spending it out takes a long time, because there’s really nothing -- there’s no such thing as shovel-ready projects.” (H/t to Conversable Economist).
Of course Obama was not necessarily referring to infrastructure funded by having the state "print and spend" as distinct from "borrow and spend followed by QE". But those two amount to the same. So that's a near irrelevant difference.
But be warned: you don’t want to mention that weakness in PQE on the blog of one of the UK’s most vociferous advocates of PQE, namely Richard Murphy. Murphaloon, as he is affectionately known in some quarters, doesn’t like anyone pointing to problems with PQE: in fact such people are liable to be banned from commenting on his blog.
And (also for the hundredth time) I’m not saying we don’t need more infrastructure. The point is that (particularly in view of the shortage of relevant skills), if we’re going to increase that sort of spending, we need to build up such spending over a few years. The only people who think infrastructure spending can be doubled in ONE YEAR live in la-la land.
I.e. so far as counter cyclical spending goes, CURRENT spending tends to be more suitable than CAPITAL spending.