Good article on reuters discussing quantative easing (QE). To you and me, that is the central bank simply printing money.

The Telegraph carries comments from members past and present of the monetary policy committee describing the haphazard and ineffective approach the Bank Of England has taken to the subject. The main problem being that in releasing some £375bn (yes, billions) of cheap money to the financial sector the banks have simply hoarded it to use as cheap capital to underwrite all their previous bad decisions. Preventing the cash from having the boost effect to the economy it was intended to in order to lift the UK economic prospects for growth

The Reuters article argues that since giving this money to banks does not work, why not give it to the people?

It lists several arguments against. Chiefly that people will exhibit the same behaviour as banks and hoard it, or that it will act against the requirement for moral hazard when making spending decisions.

The first argument ignores the fact that in saving the money populations will significantly reduce their debt levels, increases banks capital and free up marginal incomes for spending. Thereby encouraging growth and reducing the overall debt burden. The hoped for effects by a circuitous route.

The second, regarding moral hazard could be valid.

So I propose amending the idea. Instead of simply handing out the cash, use it to cancel all lower rate income tax for a year.

Think about that. No-one pays lower rate income tax. For a year. What you earn you keep.

Expensive? Certainly. But since we have already handed out £375bn to bankers who have track records for being lying thieving amoral scum why not simply leave the money with people who earn it to spend? Surprisingly it would be cheaper as well. According to HMRC income tax yielded £283bn between PAYE and general income tax last year.

Lower rate taxes are far more likely to be used to reduce household debt and get spent on goods. The feel-good factor would also permeate society; the largest impact would be to improve the lot of those in low paid work where the relative gains would be largest.

It would also not benefit those who make no financial contribution to the economy. In short, there would be no extra reward for not working.

So, good news for workers, low paid and in turn it would filter through to companies banks. Good news for the exchequer as it’s cheaper than simply throwing it at corrupt banks. Incredibly simple (and therefore cheap) to administrate…

What’s not to like?

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