The following analysis was sourced from Positive Money, a British think tank which has put forward proposals for a radical overhaul of economic and monetary matters.
Positive Money -Despite going almost unmentioned during the UK general election, monetary policy has unexpectedly taken centre stage in recent weeks.
The Labour leadership front-runner Jeremy Corbyn’s proposal for ‘people’s quantitative easing’, has attracted significant interest from commentators.
The debate has revealed that the underlying principle behind the QE for the people proposal has considerable support.
In the Financial Times, Martin Sandbu called it “an idea whose time has come”, and listed the various high-profile economists who’ve backed something similar in the past, including Adair Turner, Ben Bernanke, Mark Blyth and Eric Lonergan.
But it’s obvious that the QE for the people proposal is not without its doubters. Concerns have been raised about what Corbyn’s policy would mean for the independence of the Bank of England. Some commentators have been warned that changing the Bank’s mandate could lead to high levels of inflation.
Our research (please refer to the enclosed link) shows that these fears can be addressed, and that it’s possible for People’s QE to be used in a responsible and prudent way. But it’s clear that questions remain about how it would work, what exactly the Bank of England’s role would be, and whether it’s appropriate in today’s economic circumstances.
That is why we are calling on the UK government to establish a Money Commission. A Parliamentary commission could investigate whether our current monetary policy tools are serving the UK economy and society, and explore potential alternatives.
Since the financial crisis, significant reform of the banking system has not taken place. We have long argued that whilst money creation remains unexamined, policy makers are unable to tackle the root cause of financial instability, high house prices and rising inequality.