Clive Crook, a member of Bloomberg View’s editorial board, has gone where the sensible have long feared to tread. In today’s Bloomberg View, he recommends stimulating the economy by just giving everyone free money.
Crook also may have set a Bloomberg View record for getting everything so wrong, so quickly. By his third sentence Clive is clearly lost.
Quantitative easing would once have been seen as reckless. The official term of art – unconventional monetary policy – tacitly acknowledged that.
But QE isn’t unconventional any longer. It mostly worked, the evidence suggests.
Evidence also suggests that giving a homeless man a credit card will also create a remarkable wealth-effect right up until that first minimum payment is due. After that, not so much. But we digress. When it comes to the performance of QE in the US economy, there is little question that it failed. Then it failed again the second time. And then it failed again. The proof of each failure is inherent with each successive attempt. The fact that Clive says QE “mostly worked” and then calls for yet another round, is illustrative of Crook’s logical disconnect in and of itself.
The logic is simple. If central banks need to expand demand — and interest rates can’t be cut any further — let them send a check to every citizen. Much of this money would be spent, boosting demand just as Friedman said. Nobody, so far as I’m aware, is arguing that it wouldn’t be effective. What, then, is the objection?
“What then is the objection” with printing money and handing it to everyone?
Money printing is money printing, no matter what economists would rather call it. And money printing tends to has had provable and repeatable effects on economies, last time we checked. Crook does at least pretend to notice this problem, but then continues to pretend against all evidence that the Fed has things under control.
The only non-trivial economic objection to overt monetary financing is that the central bank, having increased the supply of money, might find it difficult to control interest rates later. When inflation starts rising and the time comes for the central bank to tighten monetary policy, will it be able to?
Is this a serious question, Mr. Crook? We can’t normalize monetary policy right now. All we can do is talk about it and set projected dates to begin normalization at some magical time in the future when our economy will be self-sustaining. And of course, those dates never come. When they approach, we find ourselves surprised that the economy has not healed itself despite our best efforts to make rich people richer. So we pretend to have a plan for sustainable economic policy and we push the dates back again. To pretend that we’ll be able to normalize after just one more fix, is a level of intellectual dishonesty which should make any columnist blush.
But for Crook, it’s all okay apparently because…
Central banks have explained why QE doesn’t cause them to lose control of interest rates.
Which brings us to our final point in this post:
We have already lost control of interest rates
As for central banks “explaining why QE doesn’t cause [central banks] to lose control of interest rates”, we can only point out the obvious: We already have lost control of interest rates.
We can’t raise them despite rampant inflation in health care, food, housing and education. We can’t raise them to stave off the biggest equity bubble in history. We can’t raise them to provide secure retirement for generation of retirees. We can’t raise them or the sham housing recovery will implode and with it the still massively overleveraged banking system. Which raises the question: What definition of “lose control” is Crook using exactly? If rates are stuck at the zero bound because the slightest twitch in the cost of money will implode the massive Ponzi scheme of the US economy, then you have by definition already lost control of rates.
And as for poor Clive, he’s clearly lost control of his senses.