by Summary:
A decade after the Global Financial Crisis (GFC) and the global economy is still so fragile that central banks are again talking about rate cuts and even a resumption of Quantitative Easing (QE). It’s likely that QE does work – it reduces the interest rate on government bonds and stimulates growth and inflation through easier financial conditions and the so-called portfolio rebalancing effect whereby investors sell their government bonds to the central bank and re-invest the proceeds in a riskier, higher yielding asset class. But we also know that successive rounds of QE have diminishing impacts. Any more QE is likely to have far less of an effect on the economy than it did back in the turmoil of the GFC or eurozone debt crisis. So if traditional QE has lost its power, what now? In
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Frances Coppola considers the following as important:
This could be interesting, too:
A decade after the Global Financial Crisis (GFC) and the global economy is still so fragile that central banks are again talking about rate cuts and even a resumption of Quantitative Easing (QE). It’s likely that QE does work – it reduces the interest rate on government bonds and stimulates growth and inflation through easier financial conditions and the so-called portfolio rebalancing effect whereby investors sell their government bonds to the central bank and re-invest the proceeds in a riskier, higher yielding asset class. But we also know that successive rounds of QE have diminishing impacts. Any more QE is likely to have far less of an effect on the economy than it did back in the turmoil of the GFC or eurozone debt crisis. So if traditional QE has lost its power, what now? In
Topics:
Frances Coppola considers the following as important:
This could be interesting, too:
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| A decade after the Global Financial Crisis (GFC) and the global economy is still so fragile that central banks are again talking about rate cuts and even a resumption of Quantitative Easing (QE). It’s likely that QE does work – it reduces the interest rate on government bonds and stimulates growth and inflation through easier financial conditions and the so-called portfolio rebalancing effect whereby investors sell their government bonds to the central bank and re-invest the proceeds in a riskier, higher yielding asset class. But we also know that successive rounds of QE have diminishing impacts. Any more QE is likely to have far less of an effect on the economy than it did back in the turmoil of the GFC or eurozone debt crisis. So if traditional QE has lost its power, what now? In this video, M&G’s Jim Leaviss talks to renowned financial author Frances Coppola about her new book, in which she argues that a “people’s QE” is needed. This involves getting cash directly into the hands of those who need it most – i.e. those of the lower incomes. In some respects it is similar to Keynesian economics, or even some of the arguments put forward by supporters of Modern Money Theory (MMT). What could a central bank do with the money it prints other than a helicopter drop? Well on top of these cash payments to every adult, it could write down mortgage debts or student loans, but it could also spend the money on grand projects, like a Green New Deal. |