“QEen” Zoe Williams is ignorant or dishonest


Mustela nivalis

Zoe Williams is a mainstream (Guardian) journalist and she is either ignorant or dishonest. (Spot the tautology.) She supports a “People’s QE”. About a month ago, even before Jeremy Corbyn was elected as Labour leader, one commentator on the LA blog under the name of “Peter” predicted that exactly this would happen. He said that Corbyn’s ideas will repulse far fewer than his party-political rivals hope – and attract more than they think. The reason being that often his policies are simply a logical extension of whatever crackpot policies they, the Tories and others, are already pursuing!

“Peter” writes:

For example, all parties support the idea of printing money; so how can politicians who have been quite happy to hand out free money to failed bankers then oppose handing out more free money as “People’s QE”? Of course Mr Corbyn is wrong, but but those who have conceded the initial principle can hardly carry much weight in opposing him.

And HEY PRESTO, up pops Guardianista Zoe Williams today and proclaims: “We do have a magic money tree, it’s called the Bank of England”. She goes on to say that it’s hypocritical to only claim that printing money will lead to inflation when it is done for “social purposes”. She has a point of course, just as our “Peter” indicated. Probably many of those criticising Williams now are not, or insufficiently, critical with regard to “conventional” QE, whereby the printed money is given to banks for loans and not to the government *directly* to spend on “infrastructure” and so forth, as Corbyn has demanded. She fails to mention in her article BTW that the government does indeed get a lot of this QE money *indirectly* through bonds handed to high street banks in exchange for said money. She probably also has some honest detractors, those who are equally critical of current QE policies, but if so Williams is not relaying that to the public.

Williams is either ignorant or dishonest is when she writes: “Quantitative easing is bizarrely unapproachable, even though it’s happening right across the world and its unwinding will dominate the economic picture for years to come”. No it’s not. There have been numerous articles and writings against QE, whether “people’s” or not, from many reputable scholars world wide. If Williams had been a little bit more observant in her research, she would have come across one or two articles posted on the Mises Institute website for example. (Here or here for example.)

Williams is behaving a bit like the Queen, who after the 2008 crash asked why “no one” had seen it coming. That is (sort of) excusable in the case of Queen Elizabeth, not however in the case of “QEen” Zoe – who is a professional journalist.

Had she dug a bit further, she would even have found that the followers of Mises were some of the few people who actually DID warn, accurately, of the coming crisis. See this video for example with Peter Schiff, who is heavily influenced by the Mises school of economics. These people not only knew the crisis was coming, but also that the reason was, yes, quantitative easing. Instead, Williams cites some mainstream economists whose recent work apparently shows “that the causes of this economic crisis, the next and the one before are all, fundamentally, the extension of credit and its impact on house prices.” Well, great: Some mainstream economists seem to be catching on. But they are obfuscating. The “cause” was expansion of credit, period. The “impact on house prices” was simply a symptom.

All that will happen, Zoe, if the government decided to invest the “magic” money elsewhere instead of private mortgages and the like is that the first symptom (bubble) of the next crisis will appear “elsewhere” instead of in the housing market. Williams writes: “the idea that we have a centrally planned, carefully stewarded monetary policy, with finite creation and demonstrable long-term aims, which some loonie leftie wants to come along and unravel, is simply wrong.” Yes, true. But that is because putting the words “centrally planned” and “carefully stewarded” in one sentence is patently loony to start with. Zoe wants to imply one thing: That it is possible to have a “centrally planned, carefully stewarded monetary policy, with finite creation and demonstrable long-term aims”. Just put the right-on, right-thinking people in charge, QEen Zoe is saying, just give them the Ring of Power, take it away from the nasty non-left people, and everything will be just dandy.

Whether QE or “people’s QE”, it’s loony. If Zoe Williams had wanted to look, she would have found out. But she didn’t. Or if she did, she didn’t tell us. So she’s either ignorant or dishonest.

7 comments

  • I’m not sure she is ignorant or dishonest in this instance.

    Two points occur to me:

    1. Regarding the 2007/8 financial crisis, the article above appears to attribute the crisis to QE, whereas I had understood it was caused by irrespondible lending, shadow trading and poor regulation. QE was posited as a government-led solution, not the cause.

    2. We’ve had QE in the UK for the past six or so years, but it has not caused significant inflation.

    • Tom,
      QE is simply a new name for an old procedure: artificially expanding the monetary base by all sorts of means.

      • That is most certainly not my understanding. I had understood the term has a specific meaning, for specific policy measures. No doubt QE does belong in the same genre as other demand-led measures, but the article above critiques specifically QE, or at least, that’s how I read it. In any case, I think such broad assertions about inflationary measures are contentious.

        So we seem to be at cross-purposes, or one of us is wrong. I ought to declare that I am not an economist, so will happily defer to the judgement of others on the subject. I certainly don’t want to get into a silly argument about it. I don’t like the journalist anyway, but I wouldn’t necessarily fault her with such stringency in this instance.

    • Interestingly, it *has* caused significant inflation, but so far only in asset prices. Stocks and shares are well ahead, and house prices are, well, ridiculous. A house I sold in 2004 for £170,000 had previously been sold in 1938 for £75. And this is the evil effect – that the beneficiaries (such as I) are those who hold assets, and the disbeneficiaries are those who do not.

  • FRANK TAYLOR/RUNNYMEDE PROJECT

    Can we kill these hoary old canards about ‘printing money’ with a few facts?;-

    1) Virtually all modern money is not ‘printed’ at all but created electronically.
    2) All money uses tokens of some sort whether (historically) clay tablets, computer digits, sea shells, wooden sticks, bits of paper or metal etc..
    3) So money has to be created by some sort of process, whether by ‘printing’, collecting sea shells, minting coins or any other method.
    4) Therefore money does not drop out of the sky or grow on trees. In fact 97% of our money supply is created by private banks out of debt using a technique of double entry accounting often referred to as the ‘fractional reserve’ or the ‘money multiplier’. That is why, if you pay say, £1000 into a bank this sum instantly doubles, being both available for you to spend whilst also being available to lend to another party. Of course the process repeats when this loan is paid into another account, and so on potentially ad infinitum.
    5) Virtually all our money supply is therefore what is called ‘Broad Money’ and is created as credit out of debt. That this mountain of debt-based money is leveraged out of a tiny base of ‘Narrow Money’ … i.e. money issued by government, mostly notes and coins … like some huge inverted pyramid … is itself suggestive of serious instability.
    6) Therefore this ‘sorcerer’s apprentice’ mechanism is at the root of our troubles, since it is in the nature of debt to accumulate within the system until the system implodes. That is what has been happening, and will continue to happen until this central question is resolved.
    7) All money is ‘fiat’ since the process of assigning value to a token, whether by law or market operation, is essentially arbitrary. As Aristotle observed … ‘money is created by law and not by nature’.
    8) From Keynes to Friedman economists agree that inflation happens when MV … i.e. money times velocity of circulation … exceeds the productive capacity of the economy … too much money chasing too few goods. On the other hand recession and depression follow when MV falls below that capacity. Too much MV and we get the flood of inflation; too little and we get the drought of recession and depression.
    9) From that point of view the provenance of the money is irrelevant. The task of monetary policy is therefore to ensure we get the right amount of money in circulation to keep the economy at its optimum capacity without inflation or deflation.
    10) Thus as velocity fluctuates and productive capacity changes the money supply will also need adjusting. This can be done by many tools beyond the crude bludgeon of interest rates which often impact adversely on sectors of the economy where there is no problem … credit controls and statutory deposits especially.
    11) It can also be done by adjusting the money supply directly if that supply is issued entirely as a function of the Common Weal. This does not necessarily mean central currency issue … local, time, electronic, virtual etc., currencies can come into play.
    12) As a rough rule of thumb add public capital investment to the interest on an unnecessary national debt and we arrive at the lien payable by the taxpayer to private banks … and all the unaccountable power than goes with that … to create the money supply … somewhere around £70-80 billions per annum prior to the 2007/8 crisis.
    13) It is absolutely true that “hand(ing) out free money to failed bankers” has resulted in inflation where stock, property and the arts and collectables markets have gone berserk in recent years. This is because these things are in limited supply.
    14) What has emerged from the crisis, the next tranche of which might be this year or might be next, is firstly that we cannot run currencies and economies by piling debt upon debt upon debt ad infinitum, and secondly that the fractional reserve system is the ultimate engine behind this debt.
    15) It is also completely true that “that the causes of this economic crisis, the next and the one before are all, fundamentally, the extension of credit”. In the 1930’s Irving Fisher showed how this happens. As credit either goes bankrupt or gets paid off the money supply which depends almost entirely on debt creation then contracts. Not only that, velocity will decrease sharply due to hoarding. We then get a double whammy … a debt-deflation spiral.
    16) Therefore either the repaid or bankrupt Broad Money has to be replaced with something resembling QE or we get a depression. Thus it is not a question of ‘printing money’ … in that sense all money is ‘printed’ … but how much money is printed, by whom and to whose benefit, and how that process is controlled institutionally.

    • @Frank Taylor: What your comment conceals is the fact that we don’t need money in the modern age. We don’t need centralised control of the means of exchange of goods and services. This is the 21st Century. We have the blockchain. We can use other methods of exchanging and storing value in universally (by protocol not by legal fiat and force of arms) that are not government mandated.
      It isn’t about how the process is controlled institutionally or even about money at all: it’s about how central banking has destroyed the free market.

  • Peter Schiff’s “predictions” are a joke. The US specialises in such seers of calamity. Just count the hits and ignore the misses, guys. The apocalypse is always just around the corner.

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