Note: This is a long article (about 4,500 words), and is extremely nerdy on the subject of monetary policy, so be warned! It offers my perspective of the political environment faced by advocates of all forms of Public Money, along with four suggestions for the direction of the movement.
People’s QE, Sovereign Money, Helicopter Money, the Chicago Plan, Full Reserve Banking – there are many names for and variations of the simple act of creating money directly and reducing our reliance on ever-growing, destabilising and unsustainable debt to do the job. Faced with zero-bound interest rates, a deflationary threat, an unstable financial system, weak growth, slack demand, and an economy starved of money, central banks have been doing just that. Their word for this money creation is “Quantitative Easing”.
It’s a lovely word, ‘Quantitative Easing’. Whatever it signifies is ‘quantitative’, and thus countable, objective and scientific – all very reassuring. And there’s nothing sudden or dramatic about the process, whatever it is. It’s merely an ‘easing’ – almost relaxing in a way. There’ll be no shocks, surprises or discontinuities about this process. It’s just a gradual, gentle and even soporific easing, safe in the arms of quantitative objectivity. The central banks and their economists picked their word well.
Of course, the term ‘Quantitative Easing’ is really two words, as is the term for the concept that the central bankers were most assiduously trying to avoid, i.e. the idea that they were ‘Printing Money’. To most people, Printing Money is obviously wrong. After all, if you can just print it, then how can it be valuable? The public understanding of money and of monetary policy is not sophisticated, and even the more knowledgeable people often automatically associate direct money creation (AKA ‘Printing Money’) with Zimbabwe and the Wiemar Republic. In the aftermath of the 2008 debt crisis, the maintenance of public confidence was critical, and central bankers and their economists had to stay as far away from the idea of printing money as possible. As I’ve said, they picked their word well.
“Anyway”, argue central bankers, “QE is not really printing money. It’s just being printed temporarily, to be loaned out – just like any bank does. It’ll be paid back and destroyed, just like any money. What came from nothing will go back to nothing and, eventually, all will be balanced as the theories say it should. Economic theory is still valid, so we can carry on as before. It’s just quantitative easing and it’s only temporary – nothing like Printing Money at all”.
But, of course, Printing Money is exactly what they’ve been doing, whatever they choose to call it.
A Vast Experiment
The term ‘Quantitative Easing’ was first used by the Japanese central bank (the BOJ) in the early 2000s to describe its attempt to fight domestic deflation by Printing Money and introducing it into the economy by buying government bonds, asset-backed securities, equities and commercial paper. The financial crisis following the 2008 collapse of Lehman Brothers saw other nations also adopting QE, and it has continued ever since, with over US$13 trillion created since then (that’s $13,000 billion or $13 million million). Of course, that figure is necessarily approximate because QE is ongoing. The central banks of the Eurozone, the UK and Japan have all expanded their QE programs recently. The European Central Bank and the Bank of Japan are now buying around $180 billion of assets a month with freshly printed money, while the Bank of England has responded to Brexit by extending QE by $60 billion. Something around $8 billion is being created out of nothing every single day.
And nothing has happened.
Well, that’s not exactly true. Asset prices have been pushed up, government debt has been massively expanded, market traders have made vast commissions, and fresh money warm off the presses has flowed into a thirsty economy (albeit in a distorted, inefficient, wasteful, unjust and generally cockeyed way). But what didn’t happen is much more important than what did happen – i.e. there has been no inflation (indeed, the deflationary threat continues). In a classic case of the Dog that Didn’t Bark, the absence of inflation in response to vast, vast quantities of freshly printed money is the most interesting effect of QE. In essence, faced with an illiquid economy starved of money and unable to encourage more debt due to the lower bound, central banks have been forced to do a vast experiment. We’re only now beginning to grasp the results of that experiment.
The idea that if you print money it will lose value has been publicly, empirically, actually tested, and found not to be true – at least, not in all circumstances. It has been proven beyond doubt that money is not just another good to be traded or bartered, but operates by different rules than those claimed by conventional economic orthodoxies. In other words, the core concept of directly created money has already been proven, the action has already been taken, the taboo has been broken, the deed has been done, and the gate has been opened. Economic reality and the threat of economic calamity have forced this policy through and, while it has been done in a grossly inefficient and unfair manner, the sky did not fall. The direct creation of money has already been done – and continues to be done. Now we just need to change how it’s done, so that it is both more efficient and fairer. QE is already a reality. We just need to tweak, adjust and reform it.
Debt-created money is a vast ‘meta-problem’, and is a core cause of many other problems – not least financial instability, inequality, austerity, poverty and all the very real human and social pain and insecurity associated with these problems. And directly-created money (a ‘meta-solution’) can address many of these problems in a very real, practical and significant way. Imagine if that $8 billion per day was being invested in infrastructure, education, healthcare and other social value. Even giving it to individuals directly and equally would have huge positive changes on both human security and welfare, and on consumer demand and economic growth. This could start tomorrow if central bankers chose to do it. Remember, they’re already printing the money, they just have to decide to redirect it.
Energised by the human costs of debt created money and inspired by the vast benefits that properly organised and directed QE could bring, many intelligent, visionary people from around are working hard at this effort, often trying to do the best they can with few resources. The International Movement for Monetary Reform lists national organisations in 23 nations, including half of Eurozone nations. The American Monetary Institute has been campaigning since 1996. The UK’s excellent Positive Money was founded in 2010. Here in Ireland we have Sensible Money. Growing numbers of economists have joined the fight, and many, many others, not affiliated with organisations, do what they can to inform, educate and raise public awareness of these issues.
Public money activists are focusing on a vast, important and urgent problem, and are proposing a simple, practical solution that could almost instantly make many millions of human lives better. I admire these people immensely, and I deeply respect their thoughts, their views and their work in this field. I, on the other hand, am new to the politics of directly-created money and my understanding of the various people, groups, organisations, perspectives and passions of public money advocacy, while growing, is still very limited. But despite this limitation I would like to begin my contribution to this struggle with what I think the global public money movement should focus on. I understand that my perspective may be uninformed by experience, but it is as knowledgeable as I can make it, and also has the advantage of being fresh.
So, for what it’s worth, here’s my overview of the situation we face and my suggestions for what I think we should do:
The Targets
Although central banks are considered independent, in practice their actions are necessarily affected by government. Of course, some form of ‘People’s QE’ directed at infrastructure or social investment would require the involvement of government, but even direct ‘Helicopter Money’ transfers would require some degree of coordination and cooperation from politicians. There are therefore two separate decision-makers involved in potential changes to QE, two sets of minds that have to be changed, and two ultimate targets for advocates of Public Money: central bankers and politicians.
However, neither central bankers or politicians make decisions on economic policy in a vacuum. They rely on a wide network of analysts, academics commentators and other advisors, influencers and expertise that they judge to be credible. To our two primary advocacy targets we must therefore add two more: the economists, advisors, academics, financial commentators and other expertise that influences both central bankers and government, and the voting public who so highly motivate politicians.
I don’t know any central bankers personally, but I do know that there are only a few of them, and that they are already very familiar with all of the options for monetary policy. I also imagine that these are probably very busy people focusing on very important things, and that they might not have much time to talk to you or I about issues that they are already thinking about. So, while I would not discourage anybody from reaching out to their friendly, local central banker if they can, for the purposes of this discussion it’s probably best to leave them alone and focus our attention on more productive pastures.
That leaves us with three targets: Experts, politicians and the public.
The Political, Media and Communication Environment
Money is a difficult topic on which to think about and talk about at a theoretical level. There’s a magic to it – something very unique and special. Money is both very real and very abstract at the same time. It’s made real and made useful solely by shared belief. In a strange parallel to the weirdness of quantum mechanics, quantified value is only potential until it collapses into a numerically-defined price during a transaction. As observation is to wave function in quantum mechanics, so transaction is to value. And it’s money that makes transactions of value possible. In many ways, the very concept of money – what it is and what it does – is weird. Part of it seems ethereal. To paraphrase the late, great Richard Feynman, “If you think you understand money, then you don’t”.
What makes it harder to discuss money in any deep and meaningful way is that, because of its importance to our day-to-day practical and emotional lives, and because of the ‘quantitative weirdness‘ at its heart, the subject of money attracts all sorts of professors, analysts, explainers and cranks. Even central bankers and their economists, with all their resources, knowledge and theories, cannot accurately predict recessions, or improve the economy much. The fact that they didn’t see the debt crisis coming, and the weakness and ineffectiveness of their response to that crisis, indicates that they, too, don’t really understand money. Into this theoretical vacuum pours a lot of noise, diluting and distracting from serious thinking and discussion of the topic. In other words, we are dealing with a complex and slippery concept that is of deep importance to most people and that everybody has an opinion about, but that few understand in any meaningful way.
Our attempts to communicate this difficult message are happening at a time when media is fragmenting into a myriad of channels, each with its own rules, culture and communicative dynamics. Mainstream media is losing market share and credibility. Fact-free ‘Trumpism’ saturates the social media channels. People are angry, cynical and distrustful. In the minds of far too many people in their struggle to understand the world, wishful and emotional belief have overcome empirical evidence about reality.
To sum up, then, in a distracted and fragmented communications environment our task is to communicate a difficult, complex message to experts, politicians and to the public. That’s what we have to do and, I’ll admit, it does seem difficult when you put it like that. But don’t forget that they’re doing it already. Don’t forget the vast QE experiment that has proved it can be done. Don’t forget that we’re just looking for the reform of an existing program. Don’t forget, we’re almost there already!
Reality is on our side, as are the many, many millions of people suffering under austerity, stagnation and instability, and the many millions more who are outraged at the clear and blatant injustice and incompetence of banking, economics and finance. They might not know it yet, but we are together in the pursuit of a very clear, defined, specific goal. Our cause is an unlocked door waiting to be pushed open. The next question is: How do we do it?
Focusing the Message
Our task is to communicate the advantages of directly-created money over debt-created money to experts, politicians and to the public. Keeping in mind that both politicians and the public listen to experts, and that the public listen to politicians, so the flow of awareness goes from experts to politicians to the public. It’s also true that some of the public will listen to anybody, that politicians listen to the public (especially at election time), and that experts only listen to each other. But for our purposes, the priority should be experts, politicians and then the public. Put it this way: if enough experts agree, then it’ll be easier to convince politicians, and if enough experts and politicians agree, then it’ll be easier to convince the public. Hopefully that will be enough to convince the central bankers.
For our purposes we can define ‘experts’ as ‘monetary nerds with a platform or with the ear of power’ (there may be people out there with a perfect understanding of and prescription for monetary economics, but if nobody’s listening to them then it doesn’t make much difference to anybody). Monetary experts are often economists, or economic commentators, or writers and editors of economic media. They may work for government, for business, or for an NGO. They may have the ear of a Prime Minister or a Treasury official, or even the ear of that unicorn that is our Holy Grail – the central banker. If they influence the monetary policy ideas of others, then they’re an expert.
There is credibility in consensus and even economists and monetary nerds are susceptible to the crowd effect. The more experts who agree, the more experts will agree with them, and so the consensus grows. A major step forward in this process was made recently in a letter to the UK Chancellor of the Exchequer, published in the Guardian, in which 36 economists put their names and academic reputations behind the following call:
“A fiscal stimulus financed by central bank money creation could be used to fund essential investment in infrastructure projects – boosting the incomes of businesses and households, and increasing the public sector’s productive assets in the process. Alternatively, the money could be used to fund either a tax cut or direct cash transfers to households, resulting in an immediate increase of household disposable incomes“.
My own opinion is that this is an excellent statement, and that it may be pivotal in moving us forward to sane, stable and fair monetary policy. I was disappointed to see the qualifier ‘could’, and would prefer to see the more politically courageous ‘should’. But my biggest problem with the letter is that, for PR purposes, it’s over, largely forgotten about already in a news cycle of the rapidly receding past. I am sure there are other economists, experts and prominent people who would like to have signed that letter, but they will never get the chance. The number of economists who put their name to the letter will be forever fixed at 36, and that number will never grow.
I therefore propose that interested members of the ‘Group of 36’ who signed that letter discuss among themselves, consult widely and agree upon a permanent, definitive and preferably political statement that other prominent economists, experts and supporters can sign, that anti-austerity, poverty, and anti-debt groups can endorse, and that the movement for Public Money can get behind. This statement would be simple, brief and, best of all, permanent. The number of individuals, groups and organisations publicly associating themselves with this statement could grow and grow, concentrating much of the credibility on this issue in one place.
In a way, what I am proposing is a petition reserved only for prominent signatories. As it grows, these signatures could e kept in a database, organised by country, or monetary jurisdiction, or profession or any other way – all to maximise the publicity value of the endorsements. Since it was the UK’s excellent Positive Money that organised the important Chancellor/Guardian letter, it makes sense that they take the lead in organising and coordinating this effort. But ideas, concept and out-of-date orthodoxies do not respect borders or jurisdictions, especially in the age of the internet. This effort must be international and global in its scope.
The gay rights movement thrived when gay people publicly and proudly came out. The marijuana legalisation movement gained huge momentum when celebrities confidently admitted to smoking. The European anti-GMO movement gained enormous traction when its cause was taken up by celebrity chefs. The movement for public money, often accused of being cranks, grows in strength every time an established, credentialed, authoritative economic expert loudly and proudly supports it – but only if others know about it.
In other words, let’s widely agree on something definitive to support, and get as many experts and influencers as possible to support it.
Building the Coalition
Once we have a defined political statement that experts, politicians and other prominent influencers can sign, we can start building our coalition. This might be a simple as asking a well-known anti-poverty NGO to sign our statement, or getting an anti-austerity political party to sign, or getting an anti-debt group to associate themselves with our common purpose. Building the list of signatories and endorsements is building the coalition. But there’s no reason to stop there.
If anti-poverty, anti-austerity, anti-financialisation and anti-debt groups can be made aware of how beneficial this policy would be to their interests, then it is reasonable to expect that they might talk to their own supporters, their own members, and their own networks about it. And since these groups are often well versed in the dark arts of politics and publicity, it is reasonable that they might focus at least some of their efforts, resources and contacts on this singular important meta-issue. With a snowballing list of economic credibility and some informational tools and material, who knows what is possible?
In other words, by using the nucleus of the expert-drafted, widely agreed and easily understood statement, and by informational tools and materials to affiliated individuals, groups and organisations, we can leverage activism and deep desire for change and coordinate this much greater political energy towards our specific policy direction.
In particular, I strongly urge coordination, cooperation and cross-pollination with another movement struggling against entrenched power and practices to solve a vast ‘meta-problem’ – i.e. the Basic Income movement. In the same way that ‘inflation’ is the primary public attitude against Public Money, ‘cost’ is the major public argument against the Basic Income. Public Money spent by government dramatically relaxes the ‘fiscal space’ available to fund a Basic Income, and Helicopter Money even directly contributes to or supplements it. Since the Basic Income movement is much, much bigger and more advanced than the Public Money movement, and since the Public Movement offers a major support to the financial viability of the Basic Income, these two progressive movements are natural allies that have much to gain from each other.
Cooperation and coordination with the Basic Income movement is also important for another reason. Most voters care little for the specifics of monetary policy. Few people cast their vote on the basis of what kind of QE the central bank should adopt. Those who follow the words of Janet Yellen, Mario Draghi and Mark Carney are few and far between – and most of them are working for the other side. Instead, the energising force of politics today is not monetary policy but the devaluation of labour and the low, unequal and insecure incomes caused by automation, globalisation and financialisation.
Income insufficiency and insecurity are the political issues of the day, which is why the Basic Income idea is developing so rapidly. People who are struggling to pay the rent or insure the car might not be interested in monetary policy, but they’ll support something that puts money in their pocket. Either directly (using Helicopter Money), or indirectly (using Public QE), the implementation of Public QE would do exactly this. And the Basic Income movement is a way to politically reach many of these people.
Focusing the Communication and Lobbying
There are many ways to influence a politician, media editor or financial journalist. Press releases, tweets and constituent’s letters may all have an effect, but nothing works better at changing minds than engaging and meeting with an individual in person. This is especially true when trying to communicate concepts as complex and confusing as monetary reform. Nothing works better than being in the room, being able to respond to questions and concerns on your feet, in real time.
I think that the Public Money movement has a lot to learn from another group campaigning on another vast, urgent ‘meta-problem’ that’s complex to explain. That ‘meta-problem’ is climate change and the group is called the Citizens’ Climate Lobby (CCL), an American-based, international organisation that campaigns for the policy of ‘Fee & Dividend‘ as a response to climate change (essentially the idea is to tax carbon and distribute the proceeds to all equally). They do this mostly through educating, organising and supporting their members to professionally lobby politicians and media. In other words, the function of the CCL is to train their members to lobby and communicate professionally and effectively in support of their agenda.
I think that the Public Money movement and the campaigning organisation within it could learn a lot from the methods of the Citizens’ Climate Lobby. I’m sure they wouldn’t mind having some of their ideas, methods and materials ‘repurposed’ for the cause of Public Money. I would encourage anybody interested in effective, focused lobbying for Public Money to check them out.
The great advantage of communicating with individuals individually is that you can adjust your message to suit that individual’s unique concerns, interests, situation and perspective – in other words, you can customise your approach. For this reason it would be difficult and counterproductive to specify what that individual message and approach should be in too much detail. However there are two aspects to communication and lobbying that I believe deserve special attention.
The first is the fact that by far the greatest conceptual barrier to acceptance of directly-created money is the fear of inflation – of money losing it’s value. This is a deep, visceral, emotional and very real fear, easily whipped up by visions of Wiemar and Zimbabwe. I believe that in the argument for Public Money it is important to fully face and acknowledge this fear. We can point out that vast QE has already happened, with no resulting inflation. We can say that vast QE is currently being produced, while deflation remains a threat. We can emphasise the irresponsibility of money created through debt by dodgey, self-interested bankers – and the responsibility of money directly created by genuinely independent central bankers with the prime mandate of maintaining the integrity of the currency. And we can acknowledge that inflation is a threat that must always be guarded against, and we can point out that deflation, stagnation and financial instability are other such threats.
My second point is that care must be taken not to alienate any particular political ideology. The Left, with their concerns about poverty, austerity, social security and government capacity are natural promoters of Public Money. But the market-loving Right, with their concerns about slack demand, weak growth, and financial instability, are also important allies. Remember, in the political PR game unlikely allies are more effective than obvious ones.
Reaching the Public
Imagine a Public Money movement that is (1) united behind a single policy statement that is, (2) endorsed by a wide and growing number of experts, politicians, groups and organisations, and (3) promoted by and within those organisations, while (4) using the resources that would flow from this new-found attention to organise a targeted and professional lobbying and PR campaign along the lines of the Citizens’ Climate Lobby (the Citizen’s Money Lobby’?). Imagine a Public Money movement that contributes to and draws support from the Basic Income movement in a coordinated movement towards a smart, effective and new economic direction fit for our globalised, high-tech, 21st Century knowledge economy.
Many of us hate the human and social costs of austerity. Many of us are outraged at the vast injustice of bank bailouts, at entrenched financial power that is a threat even to our democracies, and the direction of vast quantities of QE to benefit the richest of the rich. With a simple statement of purpose backed by as much credible expertise as possible, and with just a little organisation, we can come together to be much, much more effective than we are apart.
The many problems caused by reliance on debt-created money, and the many significant economic and human benefits of implementing some form of Public Money, are vast and sometimes difficult to grasp. Most people, most voters, most members of the public will never fully grasp them – quite rightly, they have many other things to worry about. But if they are presented with a clear and specific political goal that offers to lighten their economic load and that is endorsed by substantial and credible expertise, many people would be willing to follow.
My final suggestion is therefore to leave the job of communicating directly with the public in the hands of editors, journalists, bloggers and other communicators who understand their respective audiences better than we ever will. If we can unite behind a single, defined policy goal, and focus our shared efforts on influencing the influencers, then surely we will succeed.
After all, the money is already being printed.
Did you know that the ECB lends out the corporate assets it has bought with printed money so that borrowers of those assets can sell them short and make a profit if the price falls? The ECB has already bought and lent out securities from SAP, Siemens, Allianz, E.ON, BMW, Volkswagen, BASF, Bayer, Bosch, Merck and many other corporations since it started lending out the securities it owns six weeks ago.
