netkingcol

thinking outside the tank

Quantitative Easing and Not For Profit – The Perfect Match

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So, throwing taxpayers’ money at the banks didn’t work. We saved them, admittedly out of necessity, but they still don’t feel like reciprocating by releasing some of those billions to the real economy in the form of loans, overdrafts, and mortgages. You can’t really blame them; they share the same fears as everyone else – while the economy is in recession houses, jobs, and savings are at risk. But, if they don’t want to be part of the solution, I suggest that we ignore them – and don’t give them any more money.

The main problem in the economy is the supply of money. In normal times making money cheaper by lowering the interest rate is the tool of choice to stimulate the economy, and by and large is the only tool you need. But these are not normal times. The cost of money is lower than ever, but you can’t wheedle any out of the banks. The next tactic that might be tried is called ‘quantitative easing’. We musn’t call it ‘printing money’ in case people go to their garden sheds to service the wheelbarrows they would need to carry the money about. It won’t be real money; it will be money given, again, to the banks to pad their balance sheets in the hope that this time they’ll do the decent thing. Fat chance.

We need more money circulating in the economy and the confidence to spend it. Here’s my suggestion:

target the quantitative easing on the not-for-profit sector

This would have several beneficial effects. The beauty of charities is that they are very keen to spend the money they receive; it would go straight into the economy. Charities buy goods and services and they provide employment; they pay for research, direct aid, helplines, field-workers, and much more. Even better, rather than creating wealth they create well-being. They spend their cash working hard to solve fundamental social and medical problems, and they are very effective drivers of social change. So, instead of priming the banking pump, again, why not open the flood-gates of not-for-profit spending? A mere £10 billion, a trifling sum compared to the trillions glibly quoted in the media, would be a good start.

Copyright © Colin Hazlehurst 2009

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Written by netkingcol

February 5, 2009 at 11:33 am

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