AT Peoples Qualitative Easing CP - Michigan 7 2023 BFHGR

AFF Answers
AFF
AT: Debt Jubilee
Debt jubilee fails.
Francis Coppola 19, MBA from Cass Business School, contributor to Financial Times, cited by the NYT and the Washington Post, author of "the case for People's Quantitative Easing", 7/26/2019, page online.
However, debt jubilee has some serious difficulties. Relieving debt distress among banks and corporations costs taxpayers billions of dollars. Relieving debt distress among mortgage holders could cost the same. It is difficult to see why a young person on a low income who is struggling to pay their rent should, through their taxes, pay off the million-dollar mortgage of a business tycoon. It is also hard to see why homeowners who limit their borrowing to what they can sensibly afford should receive less from the government than people who mortgage themselves to the hilt in the expectation that house prices will always rise. Debt jubilee could be very unfair to people who are too poor to have debts or too responsible to over-borrow.
There is a second problem with debt jubilee. For every debtor, there is a creditor; and creditors are savers. Writing off debts therefore means writing down the value of savings. But working hard and building up savings is widely regarded as virtuous. Imposing losses on people who have saved, to write off the debts of those who have not, would be very unfair. Somehow, a debt jubilee would have to avoid hurting savers.
2AC---Democracy Turn
Helicopter money collapses power of the purse and democracy.
Kevin Dowd 18, adjunct scholar at the Cato Institute’s Center for Monetary and Financial Alternatives and a professor of finance and economics at Durham University in England, "Against Helicopter Money," Winter 2018, https://www.cato.org/cato-journal/winter-2018/against-helicopter-money
Fiscal Problems of Helicopter Money
I have already noted that, in conducting helicopter money operations, the central bank would be making redistribution decisions that are fiscal in nature and therefore more properly belong under the domain of the government. David Stockman (2016) goes further and suggests that helicopter money is
a central bank power grab like no other because it insinuates our unelected central bankers into the very heart of the fiscal process. Needless to say, the framers delegated the powers of the purse—spending, taxing and borrowing—to the elected branch of government, and not because they were wild‐​eyed idealists smitten by a naïve faith in the prudence of the demos. To the contrary, they did so because the decision to spend, tax and borrow is the very essence of state power. There is no possibility of democracy—for better or worse—if these fundamental powers are removed from popular control.
AT: Helicopter Money
The counterplan SUCKS and CAN'T RESOLVE THE IMPACTS OF THE 1AC. It's IRREVERSIBLE, leads to HYPERINFLATION, and it DEVALUES DOMESTIC CURRENCY.
CFI 23, Corporate Finance Institute, trains people in finance and banking, "Helicopter Money," https://corporatefinanceinstitute.com/resources/economics/helicopter-money/
Key criticisms of helicopter money include:
1. Helicopter money is irreversible
Given that money is provided directly to consumers, helicopter money – as opposed to quantitative easing – is irreversible. It has led to many economists arguing that helicopter money is not a suitable long-term solution to spur economic growth.
2. Helicopter money leads to hyperinflation
Helicopter money could undermine the value of the local currency, as consumers would lose a sense of what the currency is worth. As a result, helicopter money could lead to over-inflation.
3. Helicopter money devalues the domestic currency
As more of the domestic currency is printed, the value of the domestic currency could decrease significantly. As a result, it may discourage the purchase of domestic currency by currency speculators.
Helicopter money fails – undermines central bank independence and causes intragovernmental conflict.
Filipe Albuquerque, 9-23-2016, economist with extensive professional experience in macroeconomic, political and financial analysis with an MSc in European Political Economy from the LSE and is researching the structure of fixed income markets as a PhD Economics candidate at Birkbeck College, University of London, "The problem with helicopter money," Global Risk Insights, https://globalriskinsights.com/2016/09/the-problem-with-helicopter-money/
Helicopter money requires central banks to make choices they cannot make while undermining their independence and inflation-targeting mandate. Attempts at explicit fiscal coordination may not be feasible and may create unresolvable conflicts between central banks and political governments.
In the post-financial crisis world, unconventional monetary policy has become so mundane that the name is a contradiction in terms. Everybody does it, few know when they’ll stop it and it has probably been stretched beyond the scope of its abilities. The frustration brought about by the realisation of the latter point is such as to make it now popular to consider a more direct version of quantitative easing.
What is Helicopter Money?
“Helicopter Money” (HM) is an idea named after a parable of monetary policy described by Milton Friedman in 1969. At its core is the idea of bi-passing the intermediation of the financial system in order to give cash created by the central bank directly to consumers. After lying dormant for decades, the idea received attention in 2003 when it was discussed by Ben Bernanke in relation to Japan and again by then-EBRD Chief Economist Willem Buiter.
However, it is only as a result of the recent failures of the already unorthodox quantitative easing (QE) to lift some countries out of the liquidity traps they find themselves in that the idea has been gaining traction in policy and financial research circles. Among others, Adair Turner, Willem Buiter and strategists at Deutsche Bank, have recently advocated the policy. The fact that it was not outright.
QE, disappointments and the alternative offered by HM
In principle, central bank asset purchases funded by the creation of new currency, known as quantitative easing (QE), can impact the real economy in three different ways. It can improve confidence and expectations, raise the value of assets used as collateral thus lowering borrowing costs, and increase the amount of cash being lent.
All of these mechanisms should conspire to increase GDP and inflation, but it seems the last mechanism did not quite work as expected. Contrarily to previous downturns, the recovery from the financial crisis has been disappointingly slow, as testified by the recovery of the output gap.
Even in the USA, where QE has admittedly been most successful, its shortcomings are evident. Instead of increasing loans to consumers, the money injected by the Fed through Treasury and MBS purchases was reinvested by banks into corporate equity positions.
With historically high dividends paid by US corporates still trending upwards, the choice makes sense. Unfortunately, QE did nothing to stop the rebalancing of corporate priorities away from relatively higher shareholders payments and lower wages.
HM would bi-pass the intermediation of financial markets that is holding up that end of the recovery. Instead of giving money to banks in the hope that they will then lend the money to households, central banks could give it to households directly.
The problem with Helicopter Money
Unfortunately, there are several problems with HM. In its purest form, it would require the central bank to answer the very simple question of “Who gets the cash?” HM will inevitably result in a reorganisation of the distribution of income which no central bank is legitimately mandated or equipped to pursue. While nominally the adjustment is only relative rather than redistributive, the effect is not uncontroversial. A uniform distribution might be seen as regressive while a focus on the poor might be resented by the rest of the economy.
To resolve this issue, Adair Turner and Michael Woodford have proposed alternative cooperative arrangements between the central bank and the government whereby the first would transfer the cash through the latter. The distinctive feature of this “HM”-flavour of QE is that it would be explicitly conducted to fund fiscal stimulus. This is supported by evidence that when a monetary policy maker supports fiscal policy, fiscal multipliers are large and economic growth is likely to ensue. Woodford and Turner only disagree on whether a GDP growth target or an explicit deficit funding target would be the best tool to ensure that this coordination does not undermine central banks’ independence and their inflation-targeting mandate. However, none of them has addressed the fact that this cooperative solution simply replaces financial by political fiscal intermediation, which would introduce a range of new bottlenecks. This is not a problem if the government is a theoretical welfare maximize, but it real life that seldom is the case.
The sudden abundance would certainly remove some of the inhibitions and restraint regarding feeding interest groups. The “flypaper effect” suggests that the government would probably be more careless with its balances once they include explicitly free cash. So inefficiency and corruption may increase. For these reasons, one would expect the government and the central banks to disagree about how to use HM. In that case, one of three things could happen. The government dominates the central bank, much like UK treasury did until the 1990s; the central bank dominates the fiscal authorities like the ECB does in the Euro-Zone; or the central bank cancels HM to avoid the clash. The undesirability of any of these outcomes should undermine the validity of this fiscally intermediated form of HM.
Conclusion
Theoretically, HM should work. Unfortunately, political frictions would most likely undermine its implementation. Its desirability as a process of wealth creation is also debatable. The fact that the policy is only seriously being considered in the UK echoes the dangers and fear created by Brexit and the lengths to which UK policy makers are willing to go to avoid its costs. But perhaps that is the problem itself. Fear of stagnation and of the ensuing political backlash has left politicians unwilling to accept the natural cycle of economic activity and the tough choices that they signed up to make when they began their career. If the solution to the ongoing stagnation is to put more money in people’s pockets, politicians should campaign for it, get elected and do it through targeted fiscal stimulus, rather than expect their central bank to deliver a basic income free lunch.
Helicopter money fails and is regressive.
Felipe Albuquerque 16, economist with extensive professional experience in macroeconomic, political and financial analysis. He holds an MSc in European Political Economy from the LSE and is researching the structure of fixed income markets as a PhD Economics candidate at Birkbeck College, "The problem with helicopter money," 9/23/2016, https://globalriskinsights.com/2016/09/the-problem-with-helicopter-money/
The problem with Helicopter Money
Unfortunately, there are several problems with HM. In its purest form, it would require the central bank to answer the very simple question of “Who gets the cash?” HM will inevitably result in a reorganisation of the distribution of income which no central bank is legitimately mandated or equipped to pursue. While nominally the adjustment is only relative rather than redistributive, the effect is not uncontroversial. A uniform distribution might be seen as regressive while a focus on the poor might be resented by the rest of the economy.
Counterplan can't stimulate growth.
Eric LaRose 16, Data Scientist at Microsoft, Degree in Public Policy from Georgetown, formerly worked at the Federal Reserve Bank in Richmond, "Helicopter Money", https://www.richmondfed.org/-/media/RichmondFedOrg/publications/research/econ_focus/2016/q2/pdf/jargon_alert.pdf
The primary argument against the use of helicopter money is perhaps as much about politics as economics. Helicopter money is essentially a merging of fiscal and monetary policy, because new money is being created by central banks but distributed in the form of fiscal transfers. Central banks lack the authority to cut taxes or increase government spending. In this regard, helicopter money could threaten the independence of central banks by giving politicians some control over the money supply and the ability to finance increased government spending by printing money rather than with present or future tax hikes. Even if helicopter money were promised as a one-time occurrence, politicians could always come back for seconds. Any short-run benefits of helicopter money could be greatly outweighed by the long-run harm of reduced monetary independence, which most economists strongly agree makes monetary policy less effective over time and creates inflationary pressures.
Additionally, helicopter money’s effects may be hard to predict because its success depends largely on its ability to shape consumer behavior and inflation expectations. If consumers see such a policy as a sign of desperation, they may actually lose faith in the ability of central banks to conduct effective monetary policy, leading them to save the money instead of spending it — making helicopter money a failure. On the other hand, helicopter money, through its effects on expectations, could end up raising inflation well beyond annual 2 percent inflation targets.
2AC---Perm Do Both
Do both solves best.
Francis Coppola 19, MBA from Cass Business School, contributor to Financial Times, cited by the NYT and the Washington Post, author of "the case for People's Quantitative Easing", 7/26/2019, page online.
“When the next crisis hits, QE for the People – both helicopter money (or financing of the fiscal deficit) and investment bond buying – should clearly be the policy tool of choice. However, other policies have their place too, including QE for the Banks. When banks are damaged, and everyone is paying off debt and saving like crazy, both Main Street and Wall Street need new money, and central banks need to be able to use every tool at their disposal. Together, QE for the People and QE for the Banks make up ‘QE for Everyone’.
2NC---AT: LTNB---Politics
The People’s Case for QE by Frances Coppola
‘QE for the People’ is politically attractive too. There was widespread popular anger about governments and central banks pouring money into financial markets while ordinary people lost their homes and their jobs. Initially, that anger was mainly expressed against banks, for instance through the Occupy protests. But now, people are turning their anger against economic experts’, central banks, and centrist politicians. Politics is polarizing: the centre ground previously occupied by mainstream political parties is hollowing out, and popular opinion is shifting to extremes, both on the right and the left. Populist politicians on right and left alike now promote a nationalist and protectionist agenda which threatens the international legal and institutional framework painstakingly constructed since the Second World War. Had QE for the People been the policy choice during the Great Recession, the resurgence of destructive nationalism might have been avoided.
AFF---AT: Fed CP---Inflation
People’s QE wrecks the fragile balance between fiscal and monetary policy and triggers hyper-inflation, exacerbating inequality.
Tony Yates, 9-22-2015, professor of economics at the University of Birmingham and former Bank of England economist, "Corbyn's QE for the people jeopardises the Bank of England's independence," https://www.theguardian.com/business/economics-blog/2015/sep/22/jeremy-corbyn-qe-for-the-people-jeopardises-bank-of-england-independence
Jeremy Corbyn’s proposed “People’s QE” has provoked consternation in the academic and central banking world. Even Mark Carney, governor of the Bank of England, has weighed in, despite the perils of central bankers speaking out on matters of political controversy. PQE has divided opinions in the economic commentariat, but it has united all in getting us extremely hot under the collar.
PQE involves the government instructing the Bank of England to print money (or rather, the modern equivalent, creating electronic reserves) to purchase bonds issued by a Corbyn-established National Investment Bank. This NIB would then use the money to fund public infrastructure projects, or, in fact, whatever the government fancied.
On the face of it, this appears to get rid of the nasty business of having to finance worthy stuff by running deficits, and later, even worse, paying back the debt with taxation revenue.
But, in fact, this is not a problem solved at all. It subverts the normal separation of monetary and fiscal policy, currently preserved by the independence of the Bank of England.
So what, Corbyn’s supporters have been saying. In fact, John McDonnell wrote shortly before the last election that he wanted “democratic control” re-asserted over interest rate setting, the implication being that previously, monetary policy had been subservient to the interests of banks.
For this reason, it’s worth spelling out what independence means, and why it serves the “people”: lest the impression arise that independence is just something central bankers try to protect to make their jobs seem more important.
For starters, under current rules, the government sets the mandate for the Bank of England, and in fact the tools which it can use to do its job. Then the Bank’s monetary policy committee is left to figure out how to pull the levers it has been given to do the job that it has been assigned.
So, ultimately, parliament still decides what monetary policy (and, for that matter, financial stability policy) amounts to. The BoE is just left alone to do the job.
The reason that’s helpful is that it insulates day to day decisions from politics. One facet of this is that politicians will always find it hard to resist the temptation to stoke up a boom before an election, only later to slam on the brakes once they are safely re-elected.
For that reason there is now a fairly solid academic and central bank consensus that by ruling out this kind of political interference, independence helps keep inflation low, and less variable, and also helps smooth the booms and busts in the business cycle.
Another clear danger of PQE is, as Carney pointed out, that it removes “fiscal discipline”. Independence of the BoE prevents the government being tempted to finance pet projects with money-printing, thus avoiding the politically tricky decision to borrow.
Without this discipline, there is the risk that politicians will succumb to that temptation again and again. Expecting this, the costs of borrowing will rise, constraining the ability of governments to finance public services even more.
In the worst-case scenario we would end up with very high or hyper-inflation, and the government forced to balance spending and revenues at all times. Austerity on this scale would presumably do to the UK what the equivalent has done to Greece.
One of the elements of the debate I sense is that inflation control is something only the right are supposed to worry about. Explicitly leftist critiques positively relish showing disdain for those that worry about it.
Richard Murphy, Corbyn’s economics guru, has written on the web about his dissatisfaction with the primacy of the BoE’s inflation objective, and McDonnell has suggested adding targets on inequality and unemployment.
But – and as I notice Mark Carney emphasised this at Treasury committee on Wednesday last week – this is completely wrong-headed. High inflation tends to hit the poorest hardest. Because the few assets and cash-flows that they have, tend to be least well-protected from inflation.
The r

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