Thursday, 31 December 2015

The Helicopters already exist. If you know where to look

Once again we are getting a lot of nodding heads banging on about central bank independence. I always find this argument amusing - particularly when it comes to the central bank issuing 'helicopter money'.

Helicopter money is a form of fiscal benefit that is paid to all on an irregular basis. A sort of Universal Pension or 'winter fuel' like payment. Therefore, from a simple efficiency point of view, it should be paid, in the UK, by the Department of Work and Pensions (DWP). The DWP already has the database in place and the Universal credit structure to administer the payment. They can deal with people who are abroad, powers of attorney, and all the other nuances of paying benefits to real people.

The DWP already operate the spend side auto-stabilisers and collect the data necessary to decide whether the spend-side auto stabilisers are doing their job and therefore they could very easily decide to pay out larger benefits to all. (Alongside the child benefit, which no longer goes to all - because it became politically untenable to do so. But let's not that little fact stop the fantasy.).

So there is absolutely no need for the central bank to be involved at all in the decision as to who gets fiscal support. The structure to make the decision already exists in other parts of government. The job of a bank is as it always should be - to accept instructions for payment and process them promptly, ensuring that the entire system clears efficiently and that target interest rates are met.

At the moment the DWP pays out benefits at a rate set by parliament based upon rules set by parliament. If you qualify you get the benefit. In other words the quantity of spend floats, with HM Treasury funding the spending as required via the central bank and debt management office.

The question then moves on to whether the DWP should make these decision 'independently' of parliament. If parliament decides to cut the level of tax credits, should the DWP be able to turn around and say no you can't because that damages effective demand? If not, why not? They are the experts - apparently. If parliament can't be trusted with money, why should it be trusted with providing social security?

And then you move onto the question of war. If parliament can't be trusted with money, or social security, why should it be trusted in sending people to their deaths. Surely the nuclear button should be handed over to the Defence Council and the generals should decide what to do 'independently' of parliament. They are the experts - apparently.

Of course if the generals are in charge and are able to deploy troops independently of parliament, then we would rightly call that a military dictatorship.

Therefore the notion of an independent central bank should be called out for what it is - an economic dictatorship ruled over by a class of individuals who look after the interests of the bankers and creditors and want to prevent government having first access to the resources of the country. Those supporting the idea are excuse makers for that destructive regime.

It is time that the Bank of England was rolled into the Debt Management Office and took its proper place as an operational subsidiary of HM Treasury tasked with clearing payments, maintaining order in the banks and managing the yield curve.

Then it would be absolutely clear to those economists who favour the 'social planner' dictatorship concept that such ideas will not be tolerated in a UK democracy. There will be no room for them to dictate to parliament how much it can spend, or even what rate it can spend at. (And they do see themselves in that position. They are that arrogant).

Parliament is, and should remain, supreme.  Advisors advise and parliament decides.  The ministries then implement what they have been asked to do. The chain of command is very clear - parliament outwards - with strict limits on the terms of references of the ministries.

That way the ultimate sanction - chuck out the politicians when they inevitably screw up - remains in the hands of the people that elect them.