It was a slow day on the markets yesterday, with little driving share values other than speculation about whether the European Central Bank might at last get its finger out and try do more to stimulate the European economy.
It is worth remembering that in the middle of a prolonged continental slump the body that is charged with ensuring inflation stays close to but below 2 per cent, is still acting as if going above that target was a danger.
It is also worth remembering that the ECB president, Mario Draghi, has pointed out in the past the difficulties that arise even if his colleagues on the ECB council were swayed by the idea of quantitative easing.
QE involves using the banking system to stimulate the economy, but that’s a tricky thing to pull off when one of the core reasons the economy is in difficulty in the first place is the banjaxed nature of the banks.
Even in the UK and the US, where QE has been implemented more than in the euro zone, and the banks are in arguably better shape, the results have been less than spectacular.
This is the reason why Mark Blyth, an economics professor at Brown University, and Eric Lonergan, a London hedge fund manager, have come up with an alternative proposal for putting some oomph into the euro economy: print money and give it away, to people, not banks.
They argue in the US magazine Foreign Affairs that central banks should write cheques to every household or, in an effort to combat the growing inequality that was such a popular source of concern earlier this year, those households that constitute the poorest 80 per cent of the population.
Rather than the money getting sucked into the black hole that the banking system can be, or being used to push up the price of assets, it would be given to the hard-pressed ordinary lower- or middle-class citizen, who would most likely spend it, and thereby give a boost to the economy.
In order to calm the nerves of those who have intrinsic tendencies to shiver at the thought of economic policies that do not make life harder for the public, they suggest that interest rate increases could be used to keep any associated inflationary pressures under control.
Free money. It would be a popular policy with the punters, that’s for sure. Enda?
