With the Bank of England set to create new money out of nothing, I offer pointers to two articles which explain how this increase in the money supply will further impoverish the poor and those on fixed incomes, and how the move will diminish the chances of a sustained recovery.
The Bank of England is set this week to begin “printing money” in a ground-breaking move that will mark its most forceful action yet to curb the slump in the economy.
The Bank’s Monetary Policy Committee is expected to act on Thursday, as soon as it is given a final green light from Alistair Darling to begin the so-called quantitative easing.
The truth is that credit expansion is responsible not only for the boom-bust cycle but also for another major negative phenomenon for which public opinion mistakenly blames capitalism: namely, sharply increased economic inequality, in which the wealthier strata of the population appear to increase their wealth dramatically relative to the rest of the population and for no good reason.
Likewise money is just a medium of exchange. Its function is to permit the exchange of the products of one specialist for the products of another specialist. More money cannot generate more real savings or real economic growth.
On the contrary, a further planned expansion in monetary pumping by central banks can only weaken the flow of real savings and undermine prospects for a sustained economic revival.