Letter co-authored by yours truly and other economists and sent by Positive Money to The Financial Times on March 26 2015. This can be viewed on the FT website here
Sir, The European Central Bank forecasts unemployment in the eurozone to remain at 10 per cent even after €1.1tn of quantitative easing. This is hardly surprising: the evidence suggests that conventional QE is an unreliable tool for boosting GDP or employment.
Bank of England research shows that it benefits the well-off, who gain from increasing asset prices, much more than the poorest. In the eurozone, where interest rates are at rock bottom and bond yields have already turned negative, injecting even more liquidity into the markets will do little to help the real economy.
There is an alternative. Rather than being injected into the financial markets, the new money created by eurozone central banks could be used to finance government spending (such as investing in much needed infrastructure projects); alternatively each eurozone citizen could be given €175 per month, for 19 months, which they could use to pay down existing debts or spend as they please. By directly boosting spending and employment, either approach would be far more effective than the ECB’s plans for conventional QE.
The ECB will argue that this approach breaks the taboo of mixing monetary and fiscal policy. But traditional monetary policy no longer works. Failure to consider new approaches will unnecessarily prolong stagnation and high unemployment. It is time for the ECB and eurozone central banks to bypass the financial system and work with governments to inject newly created money directly into the real economy.
Victoria Chick, University College London
Frances Coppola, Associate Editor, Piera
Nigel Dodd, London School of Economics
Jean Gadrey, University of Lille
David Graeber, London School of Economics
Constantin Gurdgiev, Trinity College Dublin
Joseph Huber, Martin Luther University of Halle-Wittenberg
Steve Keen, Kingston University
Christian Marazzi, University of Applied Sciences and Arts of Southern Switzerland
Bill Mitchell, University of Newcastle
Ann Pettifor, Prime Economics
Helge Peukert, University of Erfurt
Lord Skidelsky, Emeritus Professor, Warwick University
Guy Standing, School of Oriental and African Studies, University of London
Kees Van Der Pijl, University of Sussex
Johann Walter, Westfälische Hochschule, Gelsenkirchen Bocholt Recklinghausen, University of Applied Sciences
John Weeks, School of Oriental and African Studies, University of London
Richard Werner, University of Southampton
Simon Wren-Lewis,University of Oxford