People’s QE? It’s Venezuela with Tea and Cakes

It is sad to see that, facing the evidence of the failure of demand-side policies and money printing, many commentators propose some of the most outdated and failed policies in modern economic history. In the UK, Mr. Jeremy Corbyn, the new leader of the Labour Party, believes that the government spends too little. With a current 44.4% of GDP public spending, saying the government spends ‘too little’ is an insult to taxpayers and efficient public bodies alike.
But Mr. Corbyn wants to penalize the private sector creating the largest transfer of wealth from savers and taxpayers to government ever designed. The Peoples QE (quantitative easing).
In Europe, we are already used to the follies of magic solutions from populist parties. Syriza, Podemos, and others always come up with ‘magic’ and allegedly ‘simple’ ideas to solve large and complex economic issues, and always fail when reality kicks in, but there are few that match the monumental nonsense of the wrongly-called ‘Peoples QE’. It is the ‘Governments QE’, rather.
Why Is this People’s QE a Bad Idea? The analysis starts from the right premise. Quantitative Easing, as we know it, does not work, and creates massive imbalances. So what do they propose? Sound money? Erasing perverse incentives of printing money and unjustifiably low rates? No. Doing exactly the same, but passing the massive perverse incentive of currency debasement to politicians who, as we all know, have no perverse incentive whatsoever to overspend (note the irony).

This post was published at Ludwig von Mises Institute on August 18, 2017.