In a February 13 article at Truthout, economist Ellen Brown wrote "
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mso-bidi-font-family:"Times New Roman"”>." The essence of her piece was a suggestion to engage in a quantitative easing (or "QE") policy for households and consumers. To date, the Federal Reserve, the US central bank, has pumped more than $3 trillion directly into banks, speculators and other investors via its three-plus QE programs since 2009. The result has been minimal economic stimulus and growth, as banks have either sat on the cash, invested it offshore, or loaned it to hedge funds and other speculators, who have pumped up the stock and junk bond markets to near-bubble levels. Brown argues for a populist form of QE for Main Street which would jumpstart the real economy. Her point is, of course, true. Central banks can pump all the supply of money they want into the economy, but if the demand to hold cash (hoarding) exceeds that supply injection, and if the velocity of money (how fast it circulates) slows dramatically (which it has), then the negative effects of both the demand for money and velocity of money more than negate the injection of money by the central bank. So, Brown argues, why not bypass the banks and investors hoarding or diverting the cash they're given by QE and the Fed to date and inject money into the economy directly?
Brown's argument is economically sound but politically difficult to realize. One reason is that monetary policy is perceived as so arcane that it is too easy for bankers and their media talking heads to oppose a given proposal and confuse the issue with the public. Another problem is that monetary solutions typically have long lag times before they have an effect, and the money doesn't always get to where it was intended to end up.
So, here's another approach that achieves the same results as the path Brown proposes and is more comprehensible to the layperson and, therefore, likely to gain broad public support and be more difficult for the banksters and their friends to oppose.
I'm referring to a more direct fiscal action – the financial transaction tax.
As this piece is being written, a fight over the same financial transaction tax is raging in the European Union. It is the best political and ideological, as well as economic, tool with which to oppose the nonsense of austerity deficit-cutting that has been ravaging the euro economies for four years now. The result of austerity, euro style, has been an inexorable march into chronic and deepening recession throughout the Eurozone. Not only are virtually all the "euro-periphery" economies – Greece, Spain, Portugal, etcetera -mired in a deep recession that has characteristics of a bona fide depression, but the core euro economies are now in recession as well. Germany in the fourth quarter has officially registered a -0.6 percent GDP decline, France a -0.3 percent GDP dip; the UK is in a triple-dip recession, and so forth. Collectively, the EU is an economic region about the size of the US economy, which itself recorded a -0.1 percent decline in the fourth quarter.
On the other side of the world, Japan just recorded its third consecutive quarter of negative GDP and is now also experiencing its third recession since 2008. Its policymakers have recently responded by setting off a global currency war that will further depress the global economy. China's GDP growth is officially around 7.5 percent, down from the 10-12 percent range. Actually, however, it is really around 5 percent, given the way China manipulates its official GDP figures. India, Brazil and other emerging economies are also slowing rapidly or in recession. In short, the world economy is clearly on a slow but inexorable downward trajectory at present that shows all the signs of continuing – as is the US economy. Much of this downward trend can be attributed to various forms of austerity programs.
Instead of counterposing a "monetarist" approach, as Brown has proposed, I would propose a people's "fiscal" approach in the form of a robust financial transactions tax. Better to tax the trillions of dollars wealthy investors and their corporations are hoarding and keeping on the sidelines and for the government to directly and immediately inject the tax revenue back into the economy, where it has the biggest bank for the buck. That's where the alternative idea of a financial transaction tax comes in.
A financial transaction tax today is a growing reality, with significant momentum underway for one right now in Europe. A report issued by the European Commission, the European Union's executive arm, this week