Nicholas Crafts, from the in the
FT says
The lessons of the 1930s are not well understood but are important. Britain enjoyed a strong recovery from the depression, with growth exceeding 3 per cent in each year between 1933 and 1937, despite a double-dip recession in 1932 and continuing turmoil in the international economy. Until 1936, growth owed nothing to rearmament. Indeed, as now, in the early 1930s the government was engaged in fiscal consolidation at a time of very precarious public finances, while from mid-1932 short-term interest rates were close to zero and could not be cut to deliver monetary stimulus. The parallels with today are clear, but today’s policymakers are unaware of the successful economic policy that revived growth. How did they pull this off 80 years ago – and could we do the same?
Economic historians describe the policy as one of “cheap money”. This entailed a commitment to raising prices back to the 1929 level, announced by the chancellor of the exchequer...
John Hempton
attributes the failure of QE to hoarders
The Federal Reserve has too much credibility. Each time it increases the money supply it buys some asset (say a government bond or even a foreign security) and issues cash. And people hold the cash because it is a reasonable store of value.
and blames the Fed
When he (Bernanke) got on 60 Minutes he proved the point. He was asked point-blank whether the Federal Reserve could print all that money and control inflation and he said it could.
Holding or hoarding cash does little for the economy
If people really believed the cash was trash they would all try to get rid of it (ie buy something) but collectively they could not get rid of it (every time they buy something it would have a new owner) and the result would be inflation. Inflation would then reduce the real value of the money stock to a level where people were comfortable holding it.
Frederick Soddy says that money represents
unrealised wealth and such is a
liability not an asset
Money is not wealth, even to the individual, but the evidence that the owner of the money has not received the wealth to which he is entitled, and that he can demand it at his own convenience. So that in a community, of necessity, the aggregate money, irrespective of its amount, represents the aggregate value of the wealth which the community prefers to be owed on these terms rather than to own.
Soddy advises that virtual wealth ie
the quantity of goods that the community abstains from possessing that is definite needs to be considered
“It is the virtual wealth which measures the value of the purchasing power of money, and not money which measures the value of wealth.”
and warns that it is the banks that have created money without wealth
The threatened collapse of our Western civilization has nothing to do with the political issues between capitalism and communism, but is the consequence of its false money system.”
