Thursday, 19 October 2017
“Progressive” objections to QE are nonsense.
Most self-styled “progressives” are wittering on about interest rate cuts and QE causing asset price increases, and thus increasing inequality: inequality in capital rather than income, that is.
But the same people are complaining about the effect of the forthcoming or probably forthcoming interest rate INCREASES.!! Those increases will of course hit those who are heavily in debt and will benefit the cash rich.
So what do “progressives” want? Darned if I know.
Progressives will however be pleased to know that there is a solution at hand: it was advocated by (shock horror) the very person who progressives most like to hate, i.e. Milton Friedman.
He (along with Warren Mosler – founder of MMT) advocated that there should be no government debt. That is, Friedman and Mosler advocated that the only state liability should be base money, which yields no interest. And that Friedman/Mosler set up amounts to a permanent zero rate of interest.
I’m inclined to agree with that F/M system, though (like Friedman) I wouldn’t rule out interest rate rises in an emergency.
But to get to that ideal situation, if that’s what it is, it would be necessary for central banks to print even more money and buy back even more government debt.
Oh no: that means asset prices rise even further! Progressives at this stage will be ringing up their shrinks for an appointment.
To summarise, progressive objections to interest rate cuts and QE are a bit of a nonsense because progressives also object to interest rate increases.
As to the inequality increasing effect of QE, that’s a once and for all effect. Moreover, that effect can perfectly well be negated by increased taxes on the better off. Thus the important question (way above the heads of most progressives this) is: what set up maximises GDP or what set up is Pareto optimum?
If in fact the Friedman/Mosler “no debt” set up is the one that maximises GDP, then that’s the one to go for. Why not maximise GDP? As to resulting inequalities, as Vilfredo Pareto explained, those can be dealt with via redistribution, i.e. taxes on the better off.