At Fulcrum I wrote this:
Quantitative easing is like trying to push string. Basically, it makes bonds and makes liquidity, but it won't work if its results are parked in the banks. It won't make much difference anyway. You only have to do the basic IS LM curves at this time in a recession/ depression to realise that what works is not even tax cuts (better - if given to those who'll spend it not save it) but actual spending. The Japanese have found it tough to bring a high value economy out of recession, but they've made a lot of infrastructure on the cheap.
My own view is that communism failed twenty years ago and capitalism has failed now. Of course it has failed - it has banks that put governments into the red to bail out banks, like a mad circle of collapse. The world divided so that the West consumed the far east's inc. China's output on the basis of debt, private and public, and the debt produced an inflation hidden by the cheap basis of manufactures and labour supply before it, so that the inflation instead went into property. That went bang and brought the system into crisis.Interestingly, a sparring partner (on the matter of postliberal theology) 'Bowman' wrote in support:
The government has eased property buying and maintained a low rate of building new property; prices have risen again and this is being seen as a sign of growth. A lot of liquidity has gone into stocks, shares and bonds. But the currencies are still in crisis and the liquidty is still not flushed out, debt passing around as ever. So it will go bang again, and again.
The answer is to realise the game is different now, and more like going back to 1945. Then a bankrupt country shared and worked on the basis of necessities, and it achieved a huge amount in a short time. They built, and on that the subsequent government freed things up a little. The neo-liberal straightjacket we have now doesn't work, and won't work. If the curves were more monetarist shape in the recent past, they are not now, and the solutions are going to have to be Keynesian, interventionist and communal.
The tragedy is that Labour is running scared of present politics when it could be leading by making the argument. Personally my vote was stolen by the Liberal Democrats and I cannot wait to punish them along with so many for what has amounted to betrayal.
What is the Church's responsibility when politicians are in the grip of a 'groupthink' that is having destructive consequences for the poor and for all?
# For the UK, Adrian's general macroeconomic view in the post below has been affirmed by Martin Wolf (Financial Times), Simon Wren-Lewis (Oxford), and Jonathan Portes (NIESR), all of whose forecasts for the UK, US, and Eurozone economies have been notably reliable from 2008 because they relied on ISLM analyses of the 'liquidity trap' and keynesian multipliers. This cannot be said for those with strongly differing views.
# For the US, whilst the financial markets seem to think, and the economists named above and below certainly think, that QE has been more effective in the US than just pushing a string, Chairman Bernanke of the Federal Reserve Board, which administers QE here, has said in testimony to the Congress just what Adrian said about the still greater effectiveness of fiscal stimulus. This is also the consensus view of independent US economists whose forecasts have been both clear and reliable, such as Paul Krugman and J Bradford Delong.
# Again, there are those who disagree, but their forecasts have failed repeatedly for reasons traceable to their rejection of ISLM analyses of the 'liquidity trap' and keynesian multipliers. With humane respect where due, some views on macroeconomics are not now of serious interest to any but future historians of the policy failures of the Lesser Depression.
# In other words, Adrian is substantially correct -- and has been shown repeatedly from publically available data to be correct -- about the condition of the UK economy. And the human costs of policies associated with the disproven theory of 'austerity' go beyond the budget cuts affecting the poor to include also high unemployment, low investment, and the damage done to future British productivity.
# The UK, US, and Eurozone governments have all, in the opinion of the International Monetary Fund, failed to follow sound keynesian principles in managing the aftermath of the crisis of 2008. It seems that Western politicians have followed misguided moral intuitions rather than evidence-based economics as their guide to policy. What should Christians do about this false moralism?
# Adrian's sketches of current UK politics and the next UK political economy are beyond my horizon here, but he is not alone in arguing for another order of things. What should Christians think about the future?