Positive Money is putting monetary policy on the political agenda. This was in evidence at the political party conferences this year, where we brought together all-star panels in packed-out rooms to talk about the need for a new form of monetary policy.
We found widespread agreement that quantitative easing is having damaging side-effects, that current monetary policies are becoming ineffective, and that we need to start thinking about alternatives.
Here are some of the highlights:
Conservative Party Conference
Watch the video here:
In Birmingham, we met to discuss “Monetary Policy After Brexit”. As Theresa May sets out her vision of an economy that works for everyone, we asked speakers to consider how monetary policy needs to change if the PM is to realise her aim.
Positive Money’s Fran opened the meeting by reminding the audience that Theresa May and George Osborne have both acknowledged a link between quantitative easing and inequality. She said that Brexit opens up the opportunity for new thinking on the economy, and that Positive Money wants to get more Conservative MPs talking about the case for doing monetary policy differently.
Steve Baker was a high-profile campaigner for Britain to leave the EU, but he said that reforming monetary policy is an even bigger personal passion. He lauded Positive Money for getting people to talk about the effect of the Bank of England’s policies on asset bubbles, even though he disagrees with Positive Money on the solution. Audience members returned the praise, describing him as the leading champion of monetary reform. Steve said that most of his colleagues don’t realise that dysfunctional monetary policy is a problem and that if they did, they’d be more outspoken about its effects.
Former Treasury minister Peter Lilley agreed that the current system is no longer working effectively. He said that the Bank of England isn’t controlling the money supply in an optimal way. Too much money was created prior to the financial crisis, and too little has been created since.
Izabella Kaminska from the FT explained the underlying dynamic at play behind central bank bond purchases. Financial markets aren’t interested in holding central bank reserves for their own sake but want the collateral behind them. She also gave cautious support to the idea of helicopter money and suggested that QE could be used to target renewables.
Hedge fund manager Eric Lonergan gave a barnstorming speech about the crisis facing central banks, given the limited tools they have available to fight another recession. He called for the creation of new monetary policy tools which target the real economy.
Labour party conference
Listen to the audio here:
The theme of our meeting in Liverpool was “The Bank of England under a Labour Government”. We asked speakers to discuss how the role of our central bank might be reimagined if Labour were in office.
Helen Goodman, the member of the Treasury Select Committee, expressed concern over the effect of QE in inequality and highlighted the fact that the Bank’s own research found that the richest 5% of households had gained the average of £185,000 each. She recalled being told by governor Mark Carney that to take account of monetary policy’s distributional effects would be “political”.
Journalist Paul Mason argued that “the monetary weapons of a centre-left government are very important”. He said that he was in favour of “targeted monetary stimulus”, and floated the idea of using quantitative easing to buy student loans.
The Guardian’s Zoe Williams called for “money as a democratic resource” more political scrutiny of monetary policy decision-making, and said that “monetary policy involves making political decisions dressed up as technical ones”.
Finally, Frances Coppola called for a greater alignment between fiscal and monetary policy. This has been a key message in Positive Money’s campaign for the Treasury to work with the Bank of England to create a new form of monetary stimulus. You can sign Positive Money’s petition for an alternative to QE here.