Just recently, the Bank of England issued a further £50 billion of money in what is known as Quantitative Easing. As far as I can ascertain this is the BofE simply printing money. The BofE then used this money to buy debt issued by the Government.
As a means of stimulating the economy, I don't see it. Much of the money that the government raises, in this way, then gets spent on the inefficient Public Sector part of the economy.
As an alternative, would it not be better if every taxpayer received a one-off payment of £1,500 to £2,000 through their pay packet?
I am sure that were such a step taken, then some would be used to pay down personal debt and some would be saved but I am confident that a sizable portion of any such payment would get into circulation in the general economy - in other words, people will spend it.
What do you think?
As a means of stimulating the economy, I don't see it. Much of the money that the government raises, in this way, then gets spent on the inefficient Public Sector part of the economy.
As an alternative, would it not be better if every taxpayer received a one-off payment of £1,500 to £2,000 through their pay packet?
I am sure that were such a step taken, then some would be used to pay down personal debt and some would be saved but I am confident that a sizable portion of any such payment would get into circulation in the general economy - in other words, people will spend it.
What do you think?
I heard a similar one, that everyone over 50 should receive £1m, with the proviso that they first paid off their mortgage. That would really get the economy moving.
ReplyDeleteBetter to invest the money in government and corporate bonds than give it to individuals as it's not means tested. Don't think Richard Branson or Carlos Teves need/deserve a £2k handout.
ReplyDeleteLet the government use it to develop/build infrastructure and let corporates use it to invest in capital.
It also helps lower the value of the pound so makes our economy a little more competitive and exports a little more attractive.
Unfortunately, we've relied too heavily on the financial sector to get by and the rest of the economy has slowly become uncompetitive (with some exceptions like education).
You can't have it both ways! We are told that people like Branson and indeed Tevez are so small in number - "top 1% take XX% of earnings etc." SO Giving these the payout wouldn't exactly be too much of a mis-target. Also, they might give to charity!
ReplyDeleteGovernment in recent past has been 'investing' thru PFI and look where that has got us!
I believe that QE, in and of itself, lowers the value of the Pound.
We still rely (and very much need) the financial sector. We are also seeing some signs of growth in the Private as it is no longer being crowded out by the Public sector.
This actually sounds like a very sensible idea! Every effort that the government or the BofE attempts to make to stimulate the economy seems to be failing, this would help to boost the economy even if only a tiny bit and would help to put confidence back into our economy.
ReplyDeleteSurely lowering the value of the pound can be a means to the recovery by itself?
ReplyDeleteDriving down the pound would surely mean more exports and a start to the rebalancing of our economy that this government would like to see?
Anonymous - I just can't see that 'growth' in the economy is going to come from fancy financial footwork shuffling electronic money from one pocket of the government's trousers, to another. Get money into the real economy - as in the high street and people's pockets and then you will see greater economic activity. IMHO
ReplyDeletetisphated - Being a free currency, the UK is not restricted like the Euro and so devaluation is an option and one that is frequently used by free countries (and those that are not so free) to stimulate export led growth and choke off imports (these become more expensive!)
ReplyDeleteGovernment policy 'drives' the sentiment in the market place and so in the UK, you would seem to have QE which normally would speak to a lowering exchange rate and a (supposedly) austere spending regime, which would normally strengthen the currency. I guess that these 'push and pull' forces get judged and we will end up, where the markets decide.
I wonder if there is too much focus on economic stimulus (QE, absurdly low interest rates, devaluing the pound etc) as a solution to our economic woes.
ReplyDeletePerhaps more focus on building a sustainable economy that doesn't rely so much on financial services or isn't so profit driven.
Perhaps we can learn something from the Mittelstand companies in Germany? They thrive and prosper despite high wages and tight labour regulations. They have different values than conventional private organisations. Often family owned they tend to focus on the long term with a responsibility to hand the firm to the next generation. They invest in employees and will often reject organisation practices like downsizing and outsourcing. In return they get a loyal workforce.
Perhaps some lessons for us to learn!
I agree about the German Mittlestand companies but they have been nurtured over time and I can't see us getting there as quickly as we need to.
ReplyDeleteI don't apologise for thinking that profit driven companies are the best hope for dragging us out of the mess. When people talk of 'not for profit' companies they forget that they are usually peopled by folks who have a drive to better themselves. Network Rail is a a case in point. Not for Profit so let's abuse the subsidy and give ourselves big bonuses!
Also back to Mittlestand - Inheritance Tax, in the UK, kind of hammers the handing on of companies to family members.