- What to expect when "QE for the people" (highly inflationary) is implemented next
- Why stagnating productivity will exacerbate the impact of higher inflation
- How energy constraints will make the situation even worse
- Why "QE for the people" will ultimately result in less prosperity for all
Having received precious little of the $45 trillion in asset wealth generated since the launch of the Federal Reserve’s QE for the Rich in 2009, the bottom 90% of households are less than enthused about another round of saving the super-wealthy from their speculative excesses in the next recession, which is due in 2019 or possibly 2020.
This time around, the political zeitgeist favors QE for the People, that is, direct transfers of newly created cash to households rather than to banks. QE for the People includes a spectrum of policy options, including Universal Basic Income (UBI), generally defined as a no-strings-attached stipend to every adult of $1,000 per month (the precise sum varies with every proposal); debt jubilees, for example, forgiving most or all of the $1.5 trillion in student loans, and tax credits for low-income workers.
Large-scale federal spending on infrastructure such as repairing bridges, building high-speed rail lines, upgrading the national electrical grid, constructing affordable housing, etc., are generally viewed as indirect QE for the People, as massive federal spending benefits the populace (as opposed to the top .1%) via improved infrastructure and it creates jobs for the bottom 95% rather than bigger bonuses for the .1% of financiers and bankers.
The political appeal of QE for the People is understandable, and it cuts across the usual ideological lines: both sides of the aisle can support higher infrastructure spending, as some of the new funds will flow into every congressional district.
So what’s not to like?
As we'll show below, QE for the People is highly inflationary. None of these programs increase productivity to any significant degree while they put trillions of dollars into a stagnant economy to chase the existing supply of goods and services which is constrained by declining productivity, cartels that can impose artificial scarcities and government regulations that add costs and delays without adding effectiveness, efficiency or productivity.
Let's begin with (…)