Thursday, 4 August 2016

Helicopter money

Of course, the main news outlets will generally concentrate their reportage on the cut in the Bank of England base rate. It is easier to explain than the other policy changes announced today. There are three other measures which will probably have a bigger impact and which are much more interesting to talk about. First, the Bank is going to buy corporate bonds in the market. This is a super-charged version of QE because yields are generally higher than for gilts, and people are more likely to reinvest the cash into other higher-yielding assets. The Bank expects corporate bond buying to provide a stronger sugar rush than for gilt based QE.

Second, the Bank is going to provide cheap loans to banks to lend out to the private sector. The loans will be contingent on them being re-lent, so stockpiling should not happen. This could lower market interest rates.

Finally, more QE Classic. Are we returning to a world in which monetary and fiscal policy support each other? The government's borrowing costs should remain low for a bit longer and this should enable the Chancellor to announce some big infrastructure projects in the autumn.

I would favour Crossrail 3, perhaps running between Gatwick and Stansted via central London. This could open up Stansted's existing spare capacity as well as spur much-needed housing development in the  outer parts of London in the route. Also, maybe the required roads and rail projects to allow Heathrow to be expanded could be underwritten..

In the North, inter-city and regional rail could be expanded.

Your pet projects, valued readers?

38 comments:

dearieme said...

"Crossrail 3, perhaps running between Gatwick and Stagnated": there are already plans for Cambridge-Gatwick trains via St Pancras.

Anonymous said...

Brexit theme

- fill in the Channel Tunnel

- Atlantic Bridge to New York

- Dig down to China

.... there may be others

Electro-Kevin said...

Of the railways I'd like to see upgrade and widening/lengthening of existing infrastructure throughout the UK:

- longer platforms for...

- longer trains

- more passing loops (to enable greater frequency and mix of intercity with local/freight)

- removal of all crossings on lines over 70mph

- more trains and carriages probably in the form of 5 car sets which can be coupled in multiple

- possible development of modern diesel versions of HST and 150 DMUs which are pretty versatile and self rescuing in times of breakdown to avert the looming electricity crisis*

as much of this made in the UK as possible so the Keynsian effect works for us. That's if some of the money is to be spent on rail (HS2 is a drain.)

*invest in independent power generation

Oh....

Block the Channel Tunnel and build a wall on our eastern coastline - but we can get the EU to pay for that.**


**That was a Trumpesque joke.

Demetrius said...

My favourite and must be first is the East Mey - Kirkwall - Lerwick tunnel.

Steven_L said...

Because corporate bond yields are far too high aren't they? Or are they hoping that people selling bonds will buy equities? Because share prices are far too low aren't they?

Companies are already loading up on cheap debt to pay barely covered dividends, this is basically the guvnor giving his blessing to that particular brand of madness.

Charlie said...

A Shinkansen-style rail link between London and the north - Leeds or Manchester, or both. Trains doing 320 km/h to get the journey time down to an hour or so. Directly subsidise fares rather than train operators. This is the sort of investment that's required if there is to be any rebalancing between the SE and the rest of the country.

Combine that with a huge housebuilding programme and local infrastructure spend in the major conurbations. Build some proper cycling infrastructure, it's a lot cheaper than other transport infrastructure. Zero stamp duty and five year council tax breaks for owner-occupiers of new builds in less-desirable areas/cities. Prohibitive stamp duty for BTL.

Nick Drew said...

For a mere £x,000,000 of Mr Carney's helicopter funds I can offer several shovel-ready opportunities on the great Schloss Drew Maintenance Acceleration Project

this guarantees employment for enthusiastic British passport-holding young people: they will gain

- respect for punctuality
- respect for reliability
- a robust & practical approach to Health&Safety
- some New Phrases (well, new to them; coined by Senior NCOs of my acquaintance over the years) that will amaze their friends down the pub
- top rates for anyone surviving two weeks
- good, honest references in very plain English

they will use UK-sourced materials (though sadly not UK-sourced tools)

Professor Pizzle said...

1. Frack. Frack. Frack. Use profits or actual energy to subsidise industrial energy use.
2. Change Town planning rules to automatically allow a certain percentage of new building per year in any town or village. Any developments beyond a certain size have to completely fund infrastructure.
3. New North/South Motorway.
4. Allow new toll roads/road pricing.

Blue Eyes said...

I like the idea of a Shetland-Orkney tunnel. Why not extend it to the Faroes as part of our committment to an open Europe?

EK good projects. Don't you secretly want to drive a MagLev though? We could surely find a compromise for the Eurotunnel: just run trains when I fancy using it.

Prof Pizzle surely the G does not need to subsidise fracking?! Agree with loosening the planning rules and letting people build toll roads.

Charlie, interesting point re fares. In Japan employers generally pay for their staff's season tickets which is why people there are happy to live several hours away. Maybe season tickets could be bought out of pre-tax income? Disclaimer: I am about to renew mine and it is bloody expensive.

DJK said...

The only other proper metro system outside of London is the Glasgow subway, built in 1893. So not Crossrail 3 (or Crossrail 2, Northern line extension, HS2, Garden Bridge, etc). London has plenty of transport investment, the rest of the country (remember them?) much, much less.

Blue Eyes said...

ND your scheme sounds convoluted enough that it might need a bit more than the new £60bn, but maybe some of that would trickle down to us - err - reporters?

Blue Eyes said...

DJK, you mean to get Scousers to the benefits office more quickly and in greater comfort?

Anonymous said...

These latest BoE measures are not just unnecessary -- a panicky response to a non-existent "post-Brexit-vote economic collapse". They verge on the insane.

Even lower interest rates will mean a slide in the exchange-rate of sterling, and a further over-heating of house prices. Electronic QE represents a theft of the value of existing money. Government spending on useless "infra-structure" is a waste of resources. And all of it, sooner or later, will result in major inflation throughout the real economy.

In short, back to the 1970's.

Steven_L said...

In short, back to the 1970's.

And introduced to thunderous applause from tory cheerleaders. Can you imagine what they'd be saying if a labour government was printing money to buy corporate paper and borrowing £100bn a year?

dearieme said...

How about a decent road to Norwich? And that perpetual fantasy, a Cambridge-Oxford railway.

DJK said...

I shouldn't really feed the trolls, but...

>DJK, you mean to get Scousers to the benefits office more quickly and in greater comfort?

Well maybe, just maybe, if Liverpool and the rest of country got 1/10th the level of public investment that London gets, those Scousers would have a proper job and with it, some self respect.

Blue Eyes said...

It has nothing to do with Tory vs Labour. I was scared of QE when it first came out because I didn't understand it. I think I do a bit better now.

I am actually interested in this stuff so I read about it in an attempt to get to know more.

QE is part of monetarism.

And if you doubt my partisanship, there are elements of McDonnell's "PQE" that have merit.

Mostly this was a light-hearted post though. As most people cottoned on to.

Blue Eyes said...

Wah!

Anonymous said...

There are a lot of rail improvements needed in the North West/Yerkshuh area. Reopening the closed Standedge rail lines would alleviate the stress on the open ones, better connections to Sheffield from Huddersfield (which, with a bit of investment, could be a surprisingly good commuter zone for the area).

Leeds, Manchester and York all have good, but small, tech areas and could do with some of the love the Government flings upon the jam-tommorow companies near Shoreditch, mainly as many are jam *today* but don't get ministers quite as damp in the nethers sadly.

Improved connections between the cities, and within their nearby towns, would open things ups nicely.

Some of the seaside towns could do with a bit of love too, places like Southport and Morecambe have a lot of potential, but a combination of provincial councils and Whitehall's map of the areas only having 'here be dragons' on it ensure it remains just that - potential.

Also for the South West, build a nice, big modern airport with a HS link to London, in Devon. It's a bone thrown to the South West and tackles that tricky Heathrow question all at once.

Electro-Kevin said...

Blue - Do I secretly want to drive a Maglev ? I don't think you so much drive it as say 'shazam !' and it just goes.

Unlike a magic carpet what I drive is more like riding an unruly elephant around a mountain pass. No suspension in the loco - lots of wind, fumes and noise - starts when it feels like it - stops when (and where) it feels like it...

Electro-Kevin said...

PS, Eurostar is the only service on which a ticket = a seat. The maximum loading is 1000 passengers on 18 coaches(because of tunnel evacuation rules), which is very light in comparison to many domestic services.

Blue Eyes said...

Eurostar is very civilised. Apparently they worked hard when designing the trains to make sure you could make a decent cup of tea despite the French regulations on hot water...

Electro-Kevin said...

Yes. The buffet crews were expertly trained in tea-bagging.

Thud said...

Yes blue we scousers need to get to the dole quicker,except for those of us living a life that London based drones can only dream of.

J Corbyn said...

If there is a spare £100bn lying around, why not buy a second set of Trident nukes.

Value for money as we stride the world stage waving our big (but redundant) stick.

Sebastian Weetabix said...

If we're going to do something as mental as Helicopter money, why privilege civil engineeers by giving them first dibs? Why not just give every taxpayer £50k of invented money on the proviso that it must first be used to pay off debt, like a Biblical Jubilee?

I commend the tome "When Money Dies" by Adam Fergusson. That's the future, right there, sitting in plain sight only 90 years back in the rear view mirror.

Blue Eyes said...

Thud, say what you like about Northerners with Massive Chips On Their Shoulders, but at least they can take a mild bit of gentle ribbing!

SW interesting idea. The thing is, are people holding back on spending and investment because of existing debt? Apparently firms are sitting on huge cash piles. Mortgage rates are low, etc. Genuine question.

Anonymous said...

Simple - Roads, reservoirs and CCGT power stations

Raedwald said...

A decent road to Norwich? No thanks. We've been trying for years to keep the routes in as slow and difficult as possible.

But for real rail vision, how about admitting that the last part of the steel wheel routes into the London terminii are wasted - or at least would be better used for rubber-wheeled light rail traffic with minimal separation carrying millions. London terminii could be located further out on mainline tracks.

Gasps of horror. But logically, these lines right into central London are wasted being used by relatively infrequent steel wheel inter-city formations with long separation between trains - there will come a point where we can't afford the luxury.

Electro-Kevin said...

Potholes.

No. Not fixing those already existing but digging new ones and filling them back in.

An endless amount of Keynsian kick starting in that.

Laban Tall said...

Abolish all fees for engineering and physics courses for UK citizens only - maybe nuclear chemistry too. Might need some creative thinking to get round EU rules. Strategic national interest and all that.

Major investment in "alternative" nuclear e.g thorium research. "Investment" to make Britain a major player, not to spend on existing French or Chinese kit.

Replace every rail line that vanished in the Beeching era, unless they have completely vanished under housing.

Stop pleasuring ourselves over total GDP or the number of people in work (the hand car wash is a symbol of this idiocy - one engineer can keep 20 automated washes functioning), worry about productivity, wages and GDP per capita. Stop increasing the population - another strategic issue.

dearieme said...

"I like the idea of a Shetland-Orkney tunnel. Why not extend it to the Faroes as part of our committment to an open Europe?"

But is it really as vital as the Wester Ross - Lewis - St Kilda - Rockall tunnel?

rwendland said...

BE, very long tunnels in Scotland and Maglevs eh. Do I detect someone hankering after his Transport Tycoon (MS-DOS) days?

Anonymous said...

LT,
good point on absolute GDP.
is it a political dick-waving thingy?
Never understood why it is so totemic. As you so rightly suggest it is a misleading measure of success and is a Government led driver for unskilled immigration.
Oops - have I just answered my own question?

Thud said...

Blue, mild ribbing or usual clichéd crap, not much difference in your case it seems, you are quick to call people for non existent racism but anybody from outside of London is fair game it seems.

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