General / Off-Topic quantative easing vs helicopter money

[beelbeebub]

I had a random thought the other day.

'Quantative easing " (QE from here in in) is supposed to help the economy by dumping cash into it (so I am led to believe)
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It achieves this via a convoluted route that (again i think I have this right) boils down to giving banks a bunch of cash so they can then lend it out to businesses etc who then use the money in ways that help the economy.
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To my mind this relies on the banks making sound decisions on the best place to put money to help the economy.
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IMHO this has at least two major flaws:
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1)The banks have not got a fantastic record of making good picks for loans in the past.
2)I supposes the bank's commercial motives are aligned with the wider economy's requirements.
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Since 2009 some £350bn has been injected into the economy via QE.
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This equates to about £7500 for every adult in the UK (assume 50mil), or just over £1k each per year.
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Would a "universal wage" of £1k per person per year over the last 7 years have boosted the economy by more than QE?

 

[Surfinjo]

Respectfully, your summation of QE is not quite correct.

When the economy grows and interest rates have fallen to the point that there is no-longer any incentive to invest, the banks's funds dry up.

QE is printing money, giving it to banks, to allow the banks to lend to businesses to grow.

It doesn't work because it's a patch up for the failure of a much larger policy of not providing society with the necessary tool to fully participate in the economy. Namely, Education, Health, Welfare support, Social work, (policing, prisons and such), and Defence.

In the final one in particular, trillions have been poured into forcing societies in the ME, Asia and Africa into supplying N America, Australia, Japan and Europe with raw materials, resulting in terrorism which creates social insecurity.

Banks are not using the additional funds to lend to businesses because there are very few suitable businesses to lend to. Many claim they are refused loans but the reality is tis refusal can only be because their business plans are unworkable. It is preposterous to suggest that banks would deliberately withhold funds to viable enterprises.

Nothing is going to ever be achieved until we as one of the more belligerent military powers stop attacking everyone and invest in the basic services our society needs to thrive.

 

[beelbeebub]

Respectfully, your summation of QE is not quite correct....
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QE is printing money, giving it to banks, to allow the banks to lend to businesses to grow

Isn't that what I said?

giving banks a bunch of cash so they can then lend it out to businesses etc who then use the money in ways that help the economy.

Banks are not using the additional funds to lend to businesses because there are very few suitable businesses to lend to. Many claim they are refused loans but the reality is tis refusal can only be because their business plans are unworkable. It is preposterous to suggest that banks would deliberately withhold funds to viable enterprises.

My take is that the banks are throwing the extra money to where the most profit is, of which one current area is property. So our property prices rocket in a bubble which is bad for society (but good for banks).

Would giving the same cash to people, who then spend it on books, clothes, hair cuts, new cars, new tools, starting a business, expanding a business, paying their rent, education, food and all the other activities of life have given the economy a bigger boost?

Also not every ill in the world is caused by the uk's military (I now it's a soap box of yours).
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FYI the UK spending on defence is around 6% of the budget. To put that in context with some of the other things you mentioned.
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Education gets nearly double the defence budget.
Health gets just over 3x the defence budget
Welfare just under 3x the defence budget
Pensions get well over 3x the defence budget.
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[Surfinjo]

My point was that QE is a bit more than simply throwing money at banks. But the points are insignificant.

The figures that are spent on the military are not the issue. (And are debatable. Many sources are putting them at 2%, equally non-issue).

It is the use of military force to take the raw materials from other societies. In the 19th century it was called colonialism, now its called military intervention.

It creates the instability, through terrorism and uncertainty, that is exacerbating the stifling of the economy.

I say with respect, you really need to try to get away from these comparative figures. Comparisons only work when the issues being compared are similar. The actual or claimed costs of each issue are of minor importance to the overall effect.

 

[beelbeebub]

Let's not get side tracked by the wrongs and rights of various conflicts.
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My central question, what's a better way of boosting the economy, dumping cash onto the banks to lend to businesses or dumping cash onto people to spend at businesses?
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I would argue that dumping money onto the people might be more effective. There is no point investing in upgrading your (say) car plant, if nobody can buy the new cars.

On the other hand if people are buying more cars, then you have more cash to reinvest.

 

[Surfinjo]

Let's not get side tracked by the wrongs and rights of various conflicts.
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My central question, what's a better way of boosting the economy, dumping cash onto the banks to lend to businesses or dumping cash onto people to spend at businesses?
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I would argue that dumping money onto the people might be more effective. There is no point investing in upgrading your (say) car plant, if nobody can buy the new cars.

On the other hand if people are buying more cars, then you have more cash to reinvest.

Neither will work while the incentives to try new enterprise are stifled by the insecurities of a world at war.

The people of Africa, the ME and SW Asia can all potentially have important ideas to exploit but none can start while their worlds are under continual threat of destruction.

There is little point in upgrading a car plant unless you have ideas to improve the product rather than simply boost production.

There is little point on creating new products while there aren't markets to sell to. Potential markets can't develop wile they live under constant threat of attack.

We don't live in little England any more. We live the planet and while we allow our leaders to use most of it to express their inner sado-dictator those markets can never develop. Those poeple will continue to be angry and we can never succeed in stopping terrorists who are willing to use their own bodies to deliver bombs.

 

[beelbeebub]

We're not going to get anywhere on this one are we?.....

 

[Surfinjo]

We're not going to get anywhere on this one are we?.....

It really depends upon where you want to go.

I suggest that no matter what we do with the economy, no matter how extra funds are channelled in, it will make no substantial difference until we deal with the problems that are causing its frustration.

It's been demonstrated, over and over, that economies grow best in a free enterprise environment. That a free enterprise environment must include the liberties of all. Excluding some for whatever reasons leads to inefficiency.

When those liberties are not granted to those in Africa or the ME, for whatever reason, free enterprise cannot thrive. More importantly, those societies cannot develop into market places which are more essential than manufacturing.

China has demonstrated that western notions of democracy are not necessary to liberty.

Added to that are the increasing numbers who are turning to ever more radical groups pledged to fight for their liberties. That means modern terrorism which includes suicide bombing.

As I suggested earlier, the realities are so much more complicated than QE.

 

[Lily from anim.o.v.e]

Won't help much, as long as the greed demands a specific interets rate as return even free money to the banks will not make them hand out significantly more laons. The problem is actually that a few people get rich and many more and more poor. This piles up money where it is only invested into money pools and not real values. It would have much bigger and better impact to give people free of interets laons, because people spend money on real goods and this generates demand. The money will still transfer again up to the people being rich and the leaders of the economy, but in that way it will go through the entir chain of economy.

In fact any proper gouvernemnt should by taxes make sure that money never piles up at one point too much. It always needs to be distributed down to the mass again because they consume. Rich people don't consume they only invest with the need for interests. Bubbles then start to exist because of interet generated virtual money that has no real world value behind it.
So distribute the money back to people and stuff gets more healthy again. Henry ford was a very clever man and had many wisdoms and knowledge about that. Modern capitalsis do cannibalise the economy. They will only understand that when the point is reached where the mass will be too poor to buy anything and demand instantly stops. Then all the koney has no value they piled up and all they own is worthless because if you want to sell things to others you need to make sure they have money to buy stuff. But aquriing cheaper labour and rising profits is killing the system that needs money floating through all stages. The US capitalistic system requires an expanding market to work, but the market isn't expanding, earth is full and saturated. So the only way to aquire more wealth and money will always require taking it away from others, thats the part where the cannibalism starts to happen. The only real step would be conquering space and opeing a HUGE amount of nearly unimited expansion.

I suggest that no matter what we do with the economy, no matter how extra funds are channelled in, it will make no substantial difference until we deal with the problems that are causing its frustration.

It's been demonstrated, over and over, that economies grow best in a free enterprise environment. That a free enterprise environment must include the liberties of all. Excluding some for whatever reasons leads to inefficiency.

Not entirely, They grow best but they reach saturations most early and then stagnation happens as well You cannot simply produce and grow endless, this only happens in a surrounding like after a war when stuff is beoken or an economy went broken. But under a saturated market there is no such a thing. When the Soviet russia collapsed the capitalistic market could extend again, and then did partially towards china. But now the globalisation has lead us to a point where the market starts to get full. nd this emans we need to get away from growth since there is no big growth anymore nor will in future. And so we need a new system that generates a healthy economy flow for everyone involved.

QE, not sure if it will help, what should comapnies invest into? When there is no market to sell stuff no investment into production makes sense. Make people have labour and get this labour properly paid, thats the healthy base for any economy.