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The Case For
The Case For People's Quantitative Easing
In the wake of the 2008 financial crisis, central banks created trillions of dollars of new money, and poured it into financial markets. 'Quantitative Easing' (QE) was supposed to prevent deflation and restore economic growth.
But the money didn't go to ordinary it went to the rich, who didn't need it. It went to big corporations and banks - the same banks whose reckless lending caused the crash. This led to a decade of stagnation, not recovery. QE failed.
In this book, Frances Coppola makes the case for a 'people's QE', in which the money goes directly to ordinary people and small businesses. She argues that it is the fairest and most effective way of restoring crisis-hit economies and helping to solve the long-term challenges of ageing populations, automation and climate change.
But the money didn't go to ordinary it went to the rich, who didn't need it. It went to big corporations and banks - the same banks whose reckless lending caused the crash. This led to a decade of stagnation, not recovery. QE failed.
In this book, Frances Coppola makes the case for a 'people's QE', in which the money goes directly to ordinary people and small businesses. She argues that it is the fairest and most effective way of restoring crisis-hit economies and helping to solve the long-term challenges of ageing populations, automation and climate change.
140 pages, Kindle Edition
First published January 1, 2019
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Displaying 1 - 12 of 12 reviews
April 18, 2020
Money is one of the most complex matters of human devising (which, almost by definition implies it's a con). There's "money" ("gold is money, and nothing else"; well...), there's "currency" (a manifestation of money), there's "debt" (arguably, the nature of money: "credit and credit alone is money, credit and not gold or silver is the one property which all men seek, the acquisition of which is the aim and object of all commerce; credit is far older than cash."). It's an abstraction, one of the most baffling (even in the case of gold and silver, the value is always a flitting market convention, although it tends to present a measure of value retention: "store of value").
On the basis of the "money", there's a plethora of derivative creations with enormous potential to generate havoc in the world.
In the end, it's intractable. It's indeed a con job.
Well, here comes Frances Coppola and she makes a cogent argument that the nature, creation and availability of money could be an instrument of justice, prosperity and promotion of basic human decency. Go figure.
The book presents an extremely well founded reasoning that decency makes sense, as "when the economy is falling off a cliff, or stuck in a deflationary slump, inflation should be the last thing central banks fear. Central banks’ job is to deliver the necessary monetary stimulus in the most effective way available. Politicians and lawmakers need to clear away all restrictions – whether legal, ideological or cultural – that prevent central banks from doing their job. When the next crisis hits, QE for the People – both helicopter money (or financing of the fiscal deficit) and investment bond buying – should clearly be the policy tool of choice. However, other policies have their place too, including QE for the Banks. When banks are damaged, and everyone is paying off debt and saving like crazy, both Main Street and Wall Street need new money, and central banks need to be able to use every tool at their disposal."
Isn't happening. Won't be happening. To have reason in one's side isn't a guarantee of anything. Unless pitchforks, probably: "Pumping up asset prices for the rich while cutting back social safety nets for the poor does not restore prosperity. All it does is make ordinary people angry. After ten years of this, it is only surprising that there are not mobs with pitchforks hammering at the gates of governments across the Western world."
So, in the distant future, pitchforks. Meanwhile, some decency, for the ones that can withstand it: "Wall Street is awash with public money, while Main Street dies of thirst. This, in a nutshell, is what has gone wrong since 2008. Damaged commercial banks, under pressure from governments to make themselves safer so that bailouts would become a thing of the past, have reduced lending seen as ‘risky’ – which unfortunately includes lending to small and medium-size businesses, the productive engines of the economy. Households, suffering from high unemployment and stagnating incomes, have paid off (or defaulted on) their debts and refused to borrow any more. Corporations, worried about future sales prospects and the parlous state of their own balance sheets, have bought back their shares and refinanced their debts at artificially low rates, instead of investing for the future. And governments, scared by rising debt, have harshly cut back government programmes that supported the poor and vulnerable, causing their incomes to crash. Meanwhile, the money created by QE has churned around on financial markets and blown up asset bubbles all over the world.
There is a better way. Central banks and governments can intervene directly in the economy, putting funding into capital investment and money into ordinary people’s pockets. This is QE for the People."
Important concise analysis and intellectual contribution.
On the basis of the "money", there's a plethora of derivative creations with enormous potential to generate havoc in the world.
In the end, it's intractable. It's indeed a con job.
Well, here comes Frances Coppola and she makes a cogent argument that the nature, creation and availability of money could be an instrument of justice, prosperity and promotion of basic human decency. Go figure.
The book presents an extremely well founded reasoning that decency makes sense, as "when the economy is falling off a cliff, or stuck in a deflationary slump, inflation should be the last thing central banks fear. Central banks’ job is to deliver the necessary monetary stimulus in the most effective way available. Politicians and lawmakers need to clear away all restrictions – whether legal, ideological or cultural – that prevent central banks from doing their job. When the next crisis hits, QE for the People – both helicopter money (or financing of the fiscal deficit) and investment bond buying – should clearly be the policy tool of choice. However, other policies have their place too, including QE for the Banks. When banks are damaged, and everyone is paying off debt and saving like crazy, both Main Street and Wall Street need new money, and central banks need to be able to use every tool at their disposal."
Isn't happening. Won't be happening. To have reason in one's side isn't a guarantee of anything. Unless pitchforks, probably: "Pumping up asset prices for the rich while cutting back social safety nets for the poor does not restore prosperity. All it does is make ordinary people angry. After ten years of this, it is only surprising that there are not mobs with pitchforks hammering at the gates of governments across the Western world."
So, in the distant future, pitchforks. Meanwhile, some decency, for the ones that can withstand it: "Wall Street is awash with public money, while Main Street dies of thirst. This, in a nutshell, is what has gone wrong since 2008. Damaged commercial banks, under pressure from governments to make themselves safer so that bailouts would become a thing of the past, have reduced lending seen as ‘risky’ – which unfortunately includes lending to small and medium-size businesses, the productive engines of the economy. Households, suffering from high unemployment and stagnating incomes, have paid off (or defaulted on) their debts and refused to borrow any more. Corporations, worried about future sales prospects and the parlous state of their own balance sheets, have bought back their shares and refinanced their debts at artificially low rates, instead of investing for the future. And governments, scared by rising debt, have harshly cut back government programmes that supported the poor and vulnerable, causing their incomes to crash. Meanwhile, the money created by QE has churned around on financial markets and blown up asset bubbles all over the world.
There is a better way. Central banks and governments can intervene directly in the economy, putting funding into capital investment and money into ordinary people’s pockets. This is QE for the People."
Important concise analysis and intellectual contribution.
July 4, 2022
Extremely clear description on how Quantitative Easing works and the multitude of tools at the disposal of both the central bank and in the case of the United States the United States Treasury.
I've read many academic journal articles, and other research papers on the topic, and this short books covers all of the basis I have read in easy to understand language.
At the end of the day when you peel back the layers of rhetorical BS employed by supply side austerity economist, you learn that none of the monetary institutions created in governments around the world are governed by immutable laws of nature, and it is all a policy choice. As the response in the United States to the COVID-19 crisis showed - if the monetary and fiscal authorities wish, they can direct enormous resources to the people, and that poverty and misery are ultimately policy choices, not personal 'failure.' It really is a matter of political will and moral fortitude.
This book will give you the rhetorical ammunition to go to bat against those who know better but wish to deploy policies rooted in austerity that privilege one class over the rest of us. It is time to fight back against this morally repugnant worldview. We can do better, and we are better than those who maliciously deny us agency over these matters.
I've read many academic journal articles, and other research papers on the topic, and this short books covers all of the basis I have read in easy to understand language.
At the end of the day when you peel back the layers of rhetorical BS employed by supply side austerity economist, you learn that none of the monetary institutions created in governments around the world are governed by immutable laws of nature, and it is all a policy choice. As the response in the United States to the COVID-19 crisis showed - if the monetary and fiscal authorities wish, they can direct enormous resources to the people, and that poverty and misery are ultimately policy choices, not personal 'failure.' It really is a matter of political will and moral fortitude.
This book will give you the rhetorical ammunition to go to bat against those who know better but wish to deploy policies rooted in austerity that privilege one class over the rest of us. It is time to fight back against this morally repugnant worldview. We can do better, and we are better than those who maliciously deny us agency over these matters.
August 4, 2019
I’m afraid I am not at all convinced by the book’s argument for ‘QE for the people’.
While the book does have some merit as a literature survey of work published in the last decade (Richard Koo on balance sheet recessions, Reinhart and Rogoff’s ‘This time is different’, Mian and Sufi’s ‘House of Debt’, Adair Turner’s ‘Between Debt and the Devil’), it is far too simplistic in its advocacy of People’s QE in order to overcome the negative distributional consequences of conventional QE.
I don’t see the policy response to the Global Financial Crisis as ‘bailing out bankers at the expense of the people’. Intervention was needed to prevent a systemic collapse of the global financial system. The counterfactual would have been much worse for everyone - but especially the most vulnerable.
Nor do I think QE is a sustainable solution to make up for for the adverse consequence of ageing populations on demand.
Although aimed at developed countries, there is a danger that the anti-central bank independence brigade from some higher inflation countries will seize on this book’s arguments to suit their own political agenda. (Just think of Ace Magashule and his call for ‘Quantity Easing’, for example). The Central Bank of Nigeria already engages in direct lending to preferred economic sectors, and already finances the government’s deficit. Inflation is in double digits (still, despite an FX peg of sorts), and the poor are no better off as a result.
While the book does have some merit as a literature survey of work published in the last decade (Richard Koo on balance sheet recessions, Reinhart and Rogoff’s ‘This time is different’, Mian and Sufi’s ‘House of Debt’, Adair Turner’s ‘Between Debt and the Devil’), it is far too simplistic in its advocacy of People’s QE in order to overcome the negative distributional consequences of conventional QE.
I don’t see the policy response to the Global Financial Crisis as ‘bailing out bankers at the expense of the people’. Intervention was needed to prevent a systemic collapse of the global financial system. The counterfactual would have been much worse for everyone - but especially the most vulnerable.
Nor do I think QE is a sustainable solution to make up for for the adverse consequence of ageing populations on demand.
Although aimed at developed countries, there is a danger that the anti-central bank independence brigade from some higher inflation countries will seize on this book’s arguments to suit their own political agenda. (Just think of Ace Magashule and his call for ‘Quantity Easing’, for example). The Central Bank of Nigeria already engages in direct lending to preferred economic sectors, and already finances the government’s deficit. Inflation is in double digits (still, despite an FX peg of sorts), and the poor are no better off as a result.
March 14, 2020
Frances Coppola is a financial writer and blogger whose book takes the reader through the post 2008 financial crash quantitative easing (QE) programme and why it failed. Using Milton Friedman’s ‘helicopter drop’ proposal, she then sets out the arguments for QE aimed directly at the population. While I’m not convinced by the mechanics and the benefits seem overstated, it sets out some interesting arguments that I’d like to read more about.
September 18, 2023
The author gives too much credit to laymen and government making the correct economic decisions, while not giving enough credence to the independence of a central bank. She is far too optimistic and naive in her assumptions of “direct QE” as a panacea for inequality, low economic growth, climate change, etc. 3 stars for drawing on valuable literature.
April 19, 2020
I’m a big fan of the Coppola Comment blog and this just like the articles on the blog, was top notch! Informative and on point 👍
Want to read
May 9, 2024relates to week 6 of international political economy
October 16, 2019
I picked up this book at the recommendation of John Authers’ Bloomberg book club (https://www.bloomberg.com/opinion/art...). It is a proposal for “helicopter money”, an idea first proposed by Milton Friedman in the wake of the Great Depression. Coppola calls it by the more palatable phrase “quantitative easing (QE) for the people”, where instead of the central bank issuing money to financial institutions, it is issued directly to individuals. This, she argues, avoids the current problem of pushing on a string where the low interest rates and large-scale asset purchases of QE have inflated asset prices but otherwise failed to stimulate the economy or encourage companies to invest productively. QE for the people would be a one-off monetary boost that kick-starts economic growth by quickly inducing spending. Coppola stresses that this is meant to complement regular QE, which is still needed to support the banks, and not replace it.
Coppola’s book is short and succinct though the topic can be rather dense; she explains her arguments clearly enough that I was able to follow most of it. She even takes the time to explain how the banking system works and corrects the misconception that banks lend out existing money: for example, when a housing loan is agreed, a bank makes a balanced pair of entries where a loan asset is created, and the amount credited into the buyer’s checking account, the latter increasing the money supply (M1). Only upon payment is the bank’s existing money involved, with an interbank transfer carried out between the reserve accounts of the buyer’s and the seller’s banks.
Although helicopter money might seem like an unrealistic, far-out strategy that is unlikely to be adopted, Japan’s long period of stagnation as well as similar low inflation in Western economies recently even after adopting large amounts of QE has made the idea more palatable. Ray Dalio argues similarly for the idea, which he calls “Monetary Policy 3” in this article (https://www.linkedin.com/pulse/its-ti...).
Coppola spends the rest of the book looking at the different ways QE for the People can be implemented, ranging from short term to long term, and from financing of public infrastructure, tax cuts, deficit spending or debt write-offs to a full on, direct stimulus to individuals. She also addresses potential objections: inflation (unlikely and there are ways to reverse it); loss of central bank independence (this should no longer be a sacred cow, and cooperation between central banks and governments is needed to tackle stubborn deflation); central bank insolvency (requires the government to back the central back to maintain confidence in it); the fear that people wouldn’t spend the money (unwarranted as long as the government gives no hint that the money might be clawed back); and that it isn’t needed as governments can do money distributions by themselves (this would not expand the monetary base).
Lastly, Coppola ends with a few additional suggestions of how QE for the People can also be used to address other big problems governments face: climate change, ageing workforces and the threat of automation. However, this seems a stretch — by her earlier arguments, QE for the People should only be used sparingly and when other stimulus measures are insufficient. Employing it too frequently might dampen its effectiveness, though the insurmountable threat of climate change might be the one exception to this.
QE for the People sounds attractive and Coppola argues her case very persuasively, but one challenge she raises is that of politics: QE was highly unpopular as the decisions involving it were made by unelected central bankers. She suggests that there could be some kind of voting, either directly or through representatives, that holds central bankers accountable to the public, and that central banks also need to work closely with responsible governments. The threat of irresponsible government might be its Archilles heel: she herself says that “the fundamental weakness of any form of helicopter money is that governments can be too irresponsible to be trusted, and that central banks that don’t trust government can become too detached from the real economy.” The rising tide of populism globally, with examples like Trump’s constant lashing of the Federal Reserve, is the exact opposite of what is needed. In a worse case scenario, profligate governments could indulge in too much helicopter money, and trigger hyperinflation (though Coppola points out that so far, most governments have erred too far on the side of austerity instead). It seems inevitable that some form of QE for the People will be used in the next big recession, but whether it can be carefully engineered and designed with safeguards to prevent its abuse by reckless governments remains to be seen.
Coppola’s book is short and succinct though the topic can be rather dense; she explains her arguments clearly enough that I was able to follow most of it. She even takes the time to explain how the banking system works and corrects the misconception that banks lend out existing money: for example, when a housing loan is agreed, a bank makes a balanced pair of entries where a loan asset is created, and the amount credited into the buyer’s checking account, the latter increasing the money supply (M1). Only upon payment is the bank’s existing money involved, with an interbank transfer carried out between the reserve accounts of the buyer’s and the seller’s banks.
Although helicopter money might seem like an unrealistic, far-out strategy that is unlikely to be adopted, Japan’s long period of stagnation as well as similar low inflation in Western economies recently even after adopting large amounts of QE has made the idea more palatable. Ray Dalio argues similarly for the idea, which he calls “Monetary Policy 3” in this article (https://www.linkedin.com/pulse/its-ti...).
Coppola spends the rest of the book looking at the different ways QE for the People can be implemented, ranging from short term to long term, and from financing of public infrastructure, tax cuts, deficit spending or debt write-offs to a full on, direct stimulus to individuals. She also addresses potential objections: inflation (unlikely and there are ways to reverse it); loss of central bank independence (this should no longer be a sacred cow, and cooperation between central banks and governments is needed to tackle stubborn deflation); central bank insolvency (requires the government to back the central back to maintain confidence in it); the fear that people wouldn’t spend the money (unwarranted as long as the government gives no hint that the money might be clawed back); and that it isn’t needed as governments can do money distributions by themselves (this would not expand the monetary base).
Lastly, Coppola ends with a few additional suggestions of how QE for the People can also be used to address other big problems governments face: climate change, ageing workforces and the threat of automation. However, this seems a stretch — by her earlier arguments, QE for the People should only be used sparingly and when other stimulus measures are insufficient. Employing it too frequently might dampen its effectiveness, though the insurmountable threat of climate change might be the one exception to this.
QE for the People sounds attractive and Coppola argues her case very persuasively, but one challenge she raises is that of politics: QE was highly unpopular as the decisions involving it were made by unelected central bankers. She suggests that there could be some kind of voting, either directly or through representatives, that holds central bankers accountable to the public, and that central banks also need to work closely with responsible governments. The threat of irresponsible government might be its Archilles heel: she herself says that “the fundamental weakness of any form of helicopter money is that governments can be too irresponsible to be trusted, and that central banks that don’t trust government can become too detached from the real economy.” The rising tide of populism globally, with examples like Trump’s constant lashing of the Federal Reserve, is the exact opposite of what is needed. In a worse case scenario, profligate governments could indulge in too much helicopter money, and trigger hyperinflation (though Coppola points out that so far, most governments have erred too far on the side of austerity instead). It seems inevitable that some form of QE for the People will be used in the next big recession, but whether it can be carefully engineered and designed with safeguards to prevent its abuse by reckless governments remains to be seen.
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August 16, 2020A lot of valuable info on monetary policy which isn’t exactly common. Book is more about the European Union than United States, would’ve liked more discussion of buying consumer/household debt as QE.
May 16, 2020
A 101 on Helicopter Money.... perhaps more relevant than ever with COVID-19
November 18, 2019
I *loved* this essay style book. Monetary policy has become extreme but it has held the financial world together by swapping long dated (and/or risky) assets with banks with repo’s. That means central banks are stuffing banks with credits on tax payments. That hasn’t been able to raise middle income levels however. In Japan the central bank keeps a lot of government debt on its books. The book explains why and why we’re headed that same direction. But most importantly it offers a new kind of QE that lender banks will rush to jumpstart economies and goes straight to the most important stakeholders: the homes. How does it propose to do this? With helecopter money drops.
I’m from Iceland and after the financial crash claimants on the fallen banks were trapped inside an FX wall. The government negotiated huge cuts to finance a homeowner debt jubilee. It should have been documented much more as it is one of the few modern debt jubilees. This is one of the reasons I am interested in people’s QE. Perhaps a new topic for Coppola to research :)
This book has one of the best and most concise explainers on bank lending I’ve seen. It’s worth reading just for how well that part is written.
The book is extremely edited and Coppola is already an amazing blogger who self-edits. This means every sentence has a purpose. Can’t tell you how many times I’ve finished reading business-y books and thought “well this should rather have been an essay”. This already is. And it is a wonderfully well argued one.
I’m from Iceland and after the financial crash claimants on the fallen banks were trapped inside an FX wall. The government negotiated huge cuts to finance a homeowner debt jubilee. It should have been documented much more as it is one of the few modern debt jubilees. This is one of the reasons I am interested in people’s QE. Perhaps a new topic for Coppola to research :)
This book has one of the best and most concise explainers on bank lending I’ve seen. It’s worth reading just for how well that part is written.
The book is extremely edited and Coppola is already an amazing blogger who self-edits. This means every sentence has a purpose. Can’t tell you how many times I’ve finished reading business-y books and thought “well this should rather have been an essay”. This already is. And it is a wonderfully well argued one.
November 18, 2024
I’d rate this book zero stars if it was an option.
Displaying 1 - 12 of 12 reviews