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Nineteen academics suggest that conventional quantitative easing is an unreliable tool for boosting GDP or employment

March 29, 2015

In a letter to the Financial Times (27.3.15), the undersigned academics refer to Bank of England research published in 2012, which concluded that QE benefits those who gain from increasing asset prices far more than the poorest [page 254].





As Telesur put it yesterday: “central banks turned on the printing presses to pump trillions of dollars into the financial system. The result, in simple terms, has been the accumulation of a vast excess of money in the financial sector and an acute shortage of it everywhere else”.

adu dhabi bankAn article in The National, Abu Dhabi, agrees:

“European quantitative easing is going to be particularly positive for Dubai,” said Monica Malik, the chief economist at Abu Dhabi Commercial Bank . . . It will be a boon to the Middle East’s capital markets, as a global financial system awash with spare liquidity searches out high-yielding assets across the Gulf . . . ‘Global equity markets are in festive mood, hovering at all-time highs,’ wrote analysts from Bank of America Merrill Lynch in a research note”.

Meanwhile, after a programme of €1.1tn of quantitative easing in the eurozone, interest rates are still at rock bottom, some sovereign and corporate bond yields have turned negative (more on this in the Wall Street Journal) and unemployment is expected to remain at 10%.

adair turner and textSee


The economists named below give a constructive alternative. Rather than being injected into the financial markets, the new money created by eurozone central banks could:

  • finance government spending (such as investing in much needed infrastructure projects);
  • or give each eurozone citizen €175 per month, for 19 months, which they could use to pay down existing debts or spend as they please.

By directly boosting spending and employment, either approach would be far more effective than the ECB’s plans for conventional QE.

They conclude: “[T]raditional monetary policy no longer works. Failure to consider new approaches will unnecessarily prolong stagnation and high unemployment.

“It is time for the ECB and eurozone central banks to bypass the financial system and work with governments to inject newly created money directly into the real economy”.

The letter, which may be read here, was signed by:

Victoria Chick, University College London

Frances Coppola, Associate Editor, Piera

Nigel Dodd, London School of Economics

Jean Gadrey, University of Lille

David Graeber, London School of Economics

Constantin Gurdgiev, Trinity College Dublin

Joseph Huber, Martin Luther University of Halle-Wittenberg

Steve Keen, Kingston University

Christian Marazzi, University of Applied Sciences and Arts of Southern Switzerland

Bill Mitchell, University of Newcastle

Ann Pettifor, Prime Economics

Helge Peukert, University of Erfurt

Lord Skidelsky, Emeritus Professor, Warwick University

Guy Standing, School of Oriental and African Studies, University of London

Kees Van Der Pijl, University of Sussex

Johann Walter, Westfälische Hochschule, Gelsenkirchen Bocholt Recklinghausen, University of Applied Sciences

John Weeks, School of Oriental and African Studies, University of London

Richard Werner, University of Southampton

Simon Wren-Lewis,University of Oxford


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