Quantitative Easing for People: The UK Labour Frontrunner’s Controversial Proposal

British MP Jeremy Corbyn has proposed a “People’s QE” that has critics crying hyperinflation and supporters saying it’s about time.

Dark horse candidate Jeremy Corbyn, who is currently leading in the polls for UK Labour Party leadership, has included in his platform “quantitative easing for people.” He said in a July 22nd presentation:

The ‘rebalancing’ I have talked about here today means rebalancing away from finance towards the high-growth, sustainable sectors of the future. How do we do this? One option would be for the Bank of England to be given a new mandate to upgrade our economy to invest in new large scale housing, energy, transport and digital projects: Quantitative easing for people instead of banks.

As his economic advisor Richard Murphy further explains it:

People’s quantitative easing is . . . a highly directed process where the debt that is . . . repurchased has been deliberately created and issued either by a green investment bank or by local authorities, health trusts and other such agencies for the specific purpose of funding new investment in the economy at the time when big business and financial markets are completely failing to deliver the scale of investment that is needed to get the UK working again and to restore our financial prosperity.

According to the Positive Money group:

Ideas in a similar vein have been advocated or at least suggested by notable economists including J M Keynes (1), Milton Friedman (2), Ben Bernanke (3), William Buiter (4) and Martin Wolf (5).  Most recently, Lord Adair Turner (6) has proposed similar ideas, highlighting that ‘there are no technical reasons to reject this option’.

Perhaps, but critics have found plenty to criticize. Peter Spence writes in the UK Telegraph:

A victory for Jeremy Corbyn in the next general election would put Britain on a collision course with Brussels and condemn the UK to “Zimbabwe-style ruin”, experts have warned.

. . . Tony Yates, a former Bank economist and now a professor at the University of Birmingham, said: “Down that road leads monetary policy ruin. . . . That’s what Zimbabwe was doing, where they ended up paying all their bills by printing new money.”

Spence also quoted Bank of England Governor Mark Carney, who said, “The reason why one doesn’t even start on this conversation is the removal of any discipline on fiscal policy that comes from that.”

The Bogus Hyperinflation Threat

Dire warnings of Zimbabwe-style hyperinflation have been leveled against quantitative easing (QE) ever since the Federal Reserve embarked on it in 2008. When the European Central Bank announced in January 2015 that it, too, would be engaging in QE – along with the US, the UK and Japan – alarmed commentators warned of currency wars, competitive beggar-thy-neighbor devaluations and hyperinflation. But QE has been going on since the late 1990s, and it hasn’t happened yet. As Bernard Hickey observed in the New Zealand Herald on August 30th:

The US Federal Reserve cut its Official Cash Rate to almost 0 per cent in 2008 and has left it there. It launched three rounds of so-called quantitative easing and has only just stopped printing money to buy Government bonds.

The Bank of Japan has been printing for years and only recently ramped that up to try to lift its economy out of decades of perma-recession. The European Central Bank has cut its deposit rate to minus 0.2 per cent to try to force savers to invest. That means savers have to pay the bank to mind their money. . . .

China has blown $310 billion propping up a stock market that has fallen at least 43 per cent from its peak. It pushed the Chinese yuan lower and spent another US$200b to stop further falls.

This week the People’s Bank of China cut its main lending rate to 4.6 per cent and loosened lending rules for banks.

Yet there is no sign of the threatened hyperinflation:

All this rate-cutting and money printing has made it attractive to buy stocks, property and bonds that produce a regular income greater than the near-zero interest rates. . . .

But, curiously, all this money printing and 0 per cent interest rates have yet to unleash the inflation dragon, at least for goods and services. Asset prices are pumped up and juicy, but goods manufactured in factories and in cloud services are firmly in deflationary mode.

Why? According to conventional economic theory, increasing the money in circulation has only one effect: when the quantity of money goes up, more money will be chasing fewer goods, driving prices up. Why hasn’t that happened with the massive rounds of QE now gone global?

A Flawed Theory

Conventional monetarist theory was endorsed until the Great Depression, when John Maynard Keynes and other economists noticed that massive bank failures had led to a substantial reduction in the money supply. Contradicting the classical theory, the shortage of money was affecting more than just prices. It appeared to be directly linked to a massive wave of unemployment, while resources sat idle. Produce was rotting on the ground while people were starving, because there was no money to pay workers to pick it or for consumers to buy it with.

Conventional theory then gave way to Keynesian theory. In a March 2015 article in The International New York Times called “Keynes Versus the IMF,” economist Dr. Asad Zaman writes of this transition:

Keynesian theory is based on a very simple idea that conduct of the ordinary business of an economy requires a certain amount of money. If the amount of money is less than this amount, then businesses cannot function — they cannot buy inputs, pay labourers or rent shops. This was the fundamental cause of the Great Depression. The solution was simple: increase the supply of money. Keynes suggested that we could print money and bury it in coal mines to have unemployed workers dig it up. If money was available in sufficient quantities, businesses would revive and the unemployed labourers would find work. By now, there is nearly universal consensus on this idea. Even Milton Friedman, the leader of the Monetarist School of Economics and an arch-enemy of Keynesian ideas, agreed that the reduction in money supply was the cause of the Great Depression. Instead of burying it in mines, he suggested that money could be dropped from helicopters to solve the problem of unemployment.

And that is where we are now: despite repeated rounds of QE, there is still too little money chasing too many goods. The current form of QE is merely an asset swap: dollars for existing financial assets (federal securities or mortgage-backed securities). The rich are getting richer from bank bailouts and very low interest rates, but the money is not going into the real economy, which remains starved of the funds necessary to create the demand that would create jobs. To be effective for that purpose, a helicopter drop of money would need to fall directly into the wallets of consumers. Far from being “undisciplined fiscal policy,” getting some new money into the real economy is imperative for getting it moving again.

According to Social Credit theory, even creating more jobs won’t solve the problem of too little money in workers’ pockets to clear the shelves of the products they produce. Sellers set their prices to cover their costs, which include more than just workers’ salaries. Chief among these non-wage costs is the interest on money borrowed to pay for labor and materials before there is a product to sell. The vast majority of the money supply comes into circulation in the form of bank loans, as the Bank of England recently acknowledged. Banks create the principal but not the interest necessary to repay their loans, leaving a “debt overhang” that requires the creation of ever more debt in an attempt to close the gap. The gap can only be closed in a sustainable way with some sort of debt-free, interest-free money dropped directly into consumers’s wallets, ideally in the form of a national dividend paid by the Treasury.

As Keynes pointed out, price inflation will occur only when the economy reaches full productive capacity. Before that, increased demand prompts an increase in supply. More workers are hired to produce more goods and services, so that demand and supply rise together. And in today’s global markets, inflationary pressures have an outlet in the excess capacity of China and the increased use of robots, computers and machines. Global economies have a long way to go before reaching full productive capacity.

Running Afoul of the EU

A more challenging roadblock to Corbyn’s proposal may simply be that there are rules against it. Peter Spence writes:

Key parts of the Labour leadership frontrunner’s plans would fall foul of EU laws intended to avoid runaway inflation, and consign the UK to a three-year legal battle with the European Court of Justice (ECJ). . . .

Mr Corbyn’s proposals would clash with Article 123 of the Lisbon Treaty, which forbids central banks from printing money to finance government spending.

Perhaps; but the ECB has already embarked on a QE program involving the purchase of government securities. What are government securities but government debt used to finance government spending? The rule has already been bent. Why not bend it in a way that actually benefits the economy, the people, and the nation’s infrastructure? Corbyn’s proposal is needed, it will work, and it is an idea whose time has come.


Ellen Brown is an attorney, founder of the Public Banking Institute, and author of twelve books including the best-selling Web of Debt. Her latest book, The Public Bank Solution, explores successful public banking models historically and globally. Her 300+ blog articles are at EllenBrown.com. Listen to “It’s Our Money with Ellen Brown” on PRN.FM.

32 Responses

  1. Ellen, great article, we need a rebirth of RCF corp.

  2. The term “QE” has a really bad meaning right ? …big banks counterfeiting money right under our noses, when the government should be generating or printing it, DEBT-FREE for infrastructure as the only fair way for new money to come into existence…but, only in amounts that will not cause inflation AND under the watchful eyes of others, like our states, who can use their 10th powers to prevent over-printing and subsequent inflation in the economy.

  3. Amen. It is only the regaining of control of credit creation, by the Governments, that can rectify the slide into poverty manufactured through the bankers evil, immoral self destructive economic insanity. Who gave the bankers ownership of our money anyway?

  4. it is a huge lie that qe 1 2 3 has not caused inflation .evidently the authors of this fable are not used to purchasing anything .they may have servants do that.all food has gone up in a way of deceit .they have down sized the amount in the pkgs and have only increased the price slightly never the less it is inflation to the tune of 25% a can of tuna used to be 6.5 oz, now 5 oz.a new Buick regal i purchased in 2011 was $30,000 for the turbo model now 36,000 dollars .so get real and start telling the truth and not fairy tales to sell your program actually wall streets program because that is the bottom line .thats why the markets are at an all time high .has nothing to do with the real economy.a fraudulent system at best and enslavement at worst.give the banks money to prop up the dolar and then leverage it into the markets and it not just the banks but individuals as well such as buffet/ichan etc.and most probably trump as well.

  5. […] Source: WEB OF DEBT BLOG British MP Jeremy Corbyn has proposed a “People’s QE” that has critics crying hyperinflation and supporters saying it’s about time. Dark horse candidate Jeremy Corbyn, who is currently leading in the polls for UK Labour Party leadership, has included in his platform “quantitative easing for people.” He said in aRead more… […]

  6. In Australia during the 2008/9 bust the labour Govt stimulated the economy by putting money in peoples pockets and by spending on house insulation and schools. It worked but unfortunately the opposition fought hard to mock it – and won.

  7. Please consider this one action, yes, one simple action.
    The FEDS did in fact QE for the Private For Profit Banks.
    The FEDS made direct purchase of bank assets.
    Why not have the FEDS do for the States exactly that-purchase
    $20 billion of State improvement bonds w/ terms of 2% for 36 years.
    Thereby creating 2-3 million jobs while at the same time producing an income stream of $1trillion (money that by law is to be turned over to Congress for appropriations
    Why would you not want $6.6trillion a year to spend..”for the betterment of mankind”? .

  8. Perhaps,
    maybe it may be discovered that where we went wrong was when we allowed Private For Profit Banks to legally ‘print’ our sovereign currency and allowed the PFPB to tax that issuance using one of the most powerful forces in the universe COMPOUND INTEREST. We allowed this to happen because of FEAR; fear that such awesome power should not be in the hands of elected politicians. We decide private for bankers were more trustworthy.
    maybe we should reconsider !

  9. Please share:
    Ellen Brown to join Bernie Sanders at Conference

    The Binzagr Institute for Sustainable Prosperity will hold its first annual conference in Ohio on October 2-3. Public banking author and advocate Ellen Brown will join Senator Bernie Sanders and other speakers for this important event. Read about it here.

    • I could not have dreamed a better persona than Dr. Ellen Brown to join in with Sen. Sanders for a conference on good common sense and wisdom to solve most of our existential problems of this nation. Now it will be nice that an event like this conference will be broadcast on national television only if our media could shakeup the fear of that old idea of “Socialism” which in this case is totally out of place because Sen. Sanders is a progressive and not a socialist in the historical meaning and when he mention the word “social” is attributed to the social programs that are very dear to his view of an harmonious society.

      • Sanders is warmonger. A Lockheed Martin water carrier. In that sense, I have to admit if he were to take the presidency he would fit right in with a long line of American leaders.

  10. The elephant in the room is the last paragraph. Everybody knows that the American anti-EU faction are hoping to exploit Corbyn to lead the anti-EU campaign in the 2017 referendum. The rest is just a means to that end. In other words, he’s just the latest “useful idiot” they hope to make use of. The last one was Alex Tsipras and that didn’t work out as they planned!

  11. This was my letter yesterday to Richard Murphy, the creator of People’s Quantitative Easing:

    Hi Richard,

    As I pointed out yesterday in a recent comment on your blog, my late uncle, Sir Harry later Lord Pilkington, was a Director of the Bank of England from 1955 until 1972. He also attended, representing British industry, the first ever Bilderberg Group meeting at the Hotel Bilderberg in Holland in 1954. Through him I learnt a lot about how powerful the City of London really was and how the dynastic bankers completely control our Parliament. Another fellow Director of the Bank of England, who wants the truth to get out about how the world’s money creation and money supply is controlled by the Bank for International Settlements, told me about the 1914 Treasury-issued, debt-free and interest-free Bradbury Pound and how this is the Achilles Heel that the City of London fears most.

    As a result I have written this open letter to Jeremy Corbyn http://www.britishconstitutiongroup.com/article/open-letter-jeremy-corbyn who is on record supporting the restoration of the Treasury Bradbury Pound. I have also pointed out that your People’s Quantitative Easing idea is, IMHO, completely flawed as it does not take into account the machinations of the Bank for International Settlements and its central banking system. It is also unnecessarily complicated when compared to the simple and tried and tested debt-free, interest-free Treasury-issued Bradbury Pound which everyone can easily understand.

    Could I please ask you to read this as well http://www.thebcgroup.co.uk/austerity.pdf – an e-book which is backed up by completely provable facts and quotes about the criminal central banking system and the BIS.

    I realise that this is not what you want to hear but I think you will agree we cannot ignore actual historical precedent, especially when it worked so well!

    I look forward to your response,

    With kind regards

    Justin Walker

  12. […] Read more: Jeremy Corbyn’s ‘Quantitative Easing for People’: The UK Labour Frontrunner’s Co… […]

  13. […] Quantitative Easing for People: The UK Labour Frontrunner’s Controversial Proposal […]

  14. […] ⇧   Quantitative Easing for People: The UK Labour Frontrunner's Controversial Proposal | WEB OF DEB… […]

  15. This analysis does not factor in the velocity of money:


    Velocity (the rate at which money changes hands) is the major factor in the rate of inflation and the onset of hyperinflation as consumers spend as fast as they can while their money still has purchasing power.

    It is this price inflation which western banks are trying to stimulate by increasing the quantity of money. Unfortunately the new money remains stuck in banks and corporate equity at zero velocity…. hence no increase in inflation… (it is described as a lack of liquidity in the system).
    What needs to happen is a means of getting the money of the banks balance sheets and into the hands of the consumer (wage earner).

    Since even the thought of wealth transfer is anethama to the 1%, it is unlikely that this transfer will ever take place. Hence more QE which only holds the banks heads above water… but for how long?

  16. As saruna2014 stated, Australia survived the GFC with barely a ripple with the helicopter approach. This also halted accelerating job losses in the retail sector.
    Not well planned was how to recover and repay the government debt thus generated.
    The govt was too slow to capitalise on the resources boom which should have financed debt repayment. Note this sector of the economy only employs 2% at it’s peak and generates significant export dollars though Extrata, BHP and similar were not paying any or minimal tax.

    The current govt want to get their hands on our superannuation (401K) by restricting how we spend in retirement. Banks and fund managers love this idea – they can charge fees forever. This money is also proposed to be invested in infrastructure by the govt. Not looking forward to retiring with 50 m of road to my name.
    We now look forward to US style student debt – one of the first actions of the ‘liberal’ government. Similar for health insurance.
    I am confident that when our economy hits the wall the cry from the current govt will be for AUSTERITY (tighten our belts).
    Corbyn is saying the right sort of things but there must be reciprocation in that debt will be created that must be repaid.
    Our black swan is likely to be the property and mortgage (bank) sectors – 4 major banks with 60% of loans tied up in mortgages.

  17. Take a look at Krugman’s article today.

    “When you print money, don’t use it to buy assets; use it to buy stuff. That is, run budget deficits paid for with the printing press.”

    Am I hearing a call for QE for Main street instead of Wall Street?

    That would be an interesting turn and I do hope Krugman is veering in this direction. For example, if states could issue infrastructure bonds which the Fed purchases, that could be highly stimulating to the economy… and has the merit of not increasing budget deficits. It also builds important stuff (like water and sewer systems; bridges; urban mass transit and affordable housing) .. all of which puts money into pockets and jumpstarts the economy.

    This measure has to be accompanied by debt write downs, mark to market etc.

    But at least we’re talking a credible plan instead of the “wealth effect- asset inflation bubble” the Greenspan- Bernanke cherished so dearly.

  18. […] on September 3, 2015 at 6:49 am said: Please consider this one action, yes, one simple action. The FEDS did in fact QE for the […]

  19. So how do you deal with the danger of cronyism? Of course, we’ve got it anyway, with the banksters in the driving seat. Maybe we need to consider the possibility that no system can work unless the society is filled with people of courage, whose lives are based on service to each other and not “gimme!.”

    • The public Bank of North Dakota does fine in that respect. German public banks do fine. Ellen Brown advocates complete transparency of the public banks’ business.
      There’s no substitute for good government. The conservative view that you can’t trust government but you can trust private companies is absurd and refuted by observation. On what do the ethics of a society depend? Culture trumps economics.

      • “On what do the ethics of a society depend?” That I think is the most important question of political-economy. (i am aware that many in that field consider the question outside their domain of inquiry.)

        At any rate, i agree that trusting private business with the credit mechanism has become no wiser than trusting the foxes to care for the chickens.

        Here is what i think is a useful question in our discussion: there are examples of national banks which have been destroyed by cronyism. Why do you think this has happened?

        Thanks for reading and responding to my comment.

        • I don’t know. Cases would have to be examined. In general, I would guess that the corrupt national banks were set up wrong–there was something wrong with the structure. That brings up the question of how to set up an honest, well-functioning government structure and how to keep it that way. German public banks and the Bank of North Dakota must have some structural positives that can be learned from.

          • I’m guessing the main difference is what kind of people live in those places, something that most analysts seem to leave out of their equations. Marx did not BTW.

  20. […] ⇧   Quantitative Easing for People: The UK Labour Frontrunner's Controversial Proposal | WEB OF DEBT BLO… […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: