Give them all €10,000!

Submitted by Matthew on 14 January, 2015 - 11:14 Author: Rhodri Evans

The economists John Muellbauer and Willem Buiter have proposed that the European Central Bank fixes the euro-depression by handing out €500 to each citizen or resident of the eurozone.

Wolfgang Munchau, in the Financial Times (12 January), argues that a handout of €10,000 per person would be more realistic.

It won't happen, but these are all conservative, mainstream economists, trying to think outside the box.

Hand out the cash, and people would spend more and be less debt-crippled. Demand would rise, quickly. New jobs and new economic output would be elicited. Price deflation would turn into moderate inflation, which benefits growth and gradually erodes debt. (It was mainly by inflation that European countries after 1945 escaped their post-war debts).

Munchau calculates his €10,000 by dividing the numbers of eurozone people into €3tn, a total a size equivalent to the QE programme in Britain.

In QE, central banks buy dodgy financial paper (essentially IOUs) from banks and give them hard cash in return. That too is designed to speed up cash-flow in the economy, but by way of "trickle-down" from banks.

The New Economics Foundation estimates that in Britain QE and similar policies have subsidised bankers by over £30 billion a year.

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