UK Opposition Leader Calls For "People's QE" - It's Venezuela With Tea & Cakes

Tyler Durden's picture

Authored by Daniel Lacalle via The Mises Institute,

It is sad to see that, facing the evidence of the failure of demand-side policies and money printing, many commentators propose some of the most outdated and failed policies in modern economic history. In the UK, Mr. Jeremy Corbyn, the new leader of the Labour Party, believes that the government spends too little. With a current 44.4% of GDP public spending, saying the government spends “too little” is an insult to taxpayers and efficient public bodies alike.

But Mr. Corbyn wants to penalize the private sector creating the largest transfer of wealth from savers and taxpayers to government ever designed... The People's QE (quantitative easing).

In Europe, we are already used to the follies of magic solutions from populist parties. Syriza, Podemos, and others always come up with “magic” and allegedly “simple” ideas to solve large and complex economic issues, and always fail when reality kicks in, but there are few that match the monumental nonsense of the wrongly-called “People´s QE”. It is the “Government´s QE”, rather.

Why Is this People’s QE a Bad Idea?

The analysis starts from the right premise. Quantitative Easing, as we know it, does not work, and creates massive imbalances. So what do they propose? Sound money? Erasing perverse incentives of printing money and unjustifiably low rates? No. Doing exactly the same, but passing the massive perverse incentive of currency debasement to politicians who, as we all know, have no perverse incentive whatsoever to overspend (note the irony).

The UK policy of increasing money supply in the past has always been based on two premises to avoid hyperinflation and currency destruction: the independence of the central bank as a central pillar of monetary policy, and the constant sterilization of asset purchases (ie, what it buys is also sold to monitor market real demand). The balance sheet of the Bank of England has remained stable since 2012, coinciding with the highest economic growth period, and is below 25% of GDP.

Corbyn´s People´s QE means that the central bank will lose its independence altogether and become a government agency that prints currency whenever the government wants, but the increase of money supply does not become part of the transmission mechanism that reaches job creators and citizens in the real economy. All the new money is for the government, with the Bank of England forced to buy all the debt issued by a “Public Investment Bank”.

The first problem is evident. The Bank of England would create money to be used indiscriminately for white elephants, a disastrous policy as seen in many EU countries, that only leaves overcapacity and a massive debt hole. By providing the public investment bank with unlimited funding, the risk of irresponsible spending is guaranteed. In a country where citizens are aware of wasteful public infrastructure, this is not a small risk. However, the monetary imbalances created by this policy would generate a massive “crowding-out” effect and incentivise cronyism, as the private sector would suffer the consequences of inflationary and tax pressures as well as unfair competition from government and its crony sectors.

The second problem is that rising public debt, even if “monetized” (hidden in the balance sheet of the investment bank), would still cripple the economy even with perennial QE. Printing money does not reduce the risk of rising imbalances as we are seeing all over the world. And the new bank´s potential losses would be covered with more taxes.

The idea of building lots of bridges and airports all over the place to “create” jobs would be mildly amusing if it hadn’t failed time and time again and forgets the cost of running those infrastructure projects once built, apart from the debt incurred. All paid by the taxpayer, who guarantees the capital of the Public Investment Bank.

The third problem is that inflation created by these projects is paid by the usual suspects, the private sector, and citizens, who do not benefit from this spending as the laws of diminishing returns and debt saturation show.

The Socialist idea that governments artificially creating money will not cause inflation — because the supply of money will rise in tandem with supply and demand of goods and services — is simply science fiction. The government does not have a better or more accurate understanding of the needs and demand for goods and services or the productive capacity of the economy. In fact it has all the incentives to overspend and transfer its inefficiencies to everyone else. As such, like any perverse incentive under the so-called “stimulate internal demand” fallacy, the government simply creates larger monetary imbalances to disguise the fiscal deficit created by spending and lending without real economic return: Creating massive inflation, economic stagnation as productivity collapses and impoverishing everyone… except itself.

These policies lead to tax increases, a higher cost of living and, above all, destroying a large part of the British private sector as the government monopolizes the major sectors of the economy and increases taxes for the rest.

These dangerous magic-solution policies have already been implemented in the past. They are nothing more than the Argentine model of Kirchner and Kiciloff disguised in Anglo-Saxon terms, a model that has only created stagflation. It is also the Venezuela model (Mr. Corbyn was a defender of Chavez and his economic policies). To think that the government can decide how much money is created and spend it on whatever it wants without thinking of the consequences for the economy.

The myth is that they say printing money will not cause inflation because it will increase productivity and the increase in money supply will come in tandem with more goods and services:

Inflation occurs when you have more money chasing the same or less amount of goods and services. If you have money creation that increases productivity, yes you have more money but you also have more goods and services…the supply of both increases in tandem, so you don’t necessarily have to have inflation.

It's Been Tried Before 

The problem? It is simply a myth debunked by history. Every single attempt at this socialist myth of productivity, supply and demand moving in tandem because the government says so, fails. It never happens. The government does not have better or more detailed information than the private sector of what goods and services the economy needs, and even less knowledge of how to boost productivity because it does not have the incentive of profitability and efficiency, just of maximizing budget spending.

Productivity collapses as government overspends on white elephants and politically motivated investments with no real economic return. The supply of goods and services does not increase in tandem with money supply in an open economy dependent on imports like the UK’s. Basically, the theory sounds nice, it simply never happens.

At least, when private banks “create money”, they have an incentive to lend with a real economic return and to try to recover the principal, with an interest. They might fail, and therefore my defense of a minimum cash coefficient and sound money. However, the government has no such incentive, rather the opposite. To create money to spend on politically motivated items, and pass the imbalance through inflation and currency debasement to the productive sectors.

The lesson from Japan was clear: “Individual consumption only went up by around 0.1-0.2% of GDP and failed to increase long-run consumption. Overall, the program did not ignite inflation or help Japan out of its economic rut“. And the lessons from Chile with Allende, and Argentina with Kiciloff, are scary.

Corbyn forgets that the public sector cannot exist without private sector revenues. Printing money does not create prosperity, it dilutes it. Be it through current or other QEs.

The aristocrats of public spending always think that intervening on money creation and the economy is going to solve everything.

Do they know this will not work either? Yes, but the final objective is different. To make government control all aspects of the economy, whether it is in recession or in depression. For Corbyn, the government is infallible and any mistake it makes has to be blamed on an external enemy.

If Corbyn implements this “People’s QE”, it will be “Venezuela with tea and cakes”.

The People’s QE is the same as any other quantitative easing, a massive monetary imbalance today under the promise of solving it in the future. The current QEs will likely end with a financial crisis. The People’s QE would do the same. Except that the “alleged” beneficiaries, the “people”, will likely be drowned in inflation as the mirage of money supply and goods and services growing in tandem is proven as fake as it is in today’s QE programs. But without sterilization and transmission mechanisms, the inflation that is created today in financial assets would make prices soar due to devaluation.

Monetary imbalances always create inflation. Whether it is asset price inflation or goods, it is the symptom of aa larger problem. Because all monetary imbalances end with either a financial crisis, massive inflation or massive unemployment once the small and temporary effect of the monetary placebo ends.

The artificial creation of money without any support is always behind every crisis. The People’s QE has failed every time it has been implemented. This would not be different.

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takeaction's picture

Why has our "Fiat" system continued for so long? After listening for decades to Ron Paul, Peter Schiff, etc.... This is it!!  It is all going to COLLAPSE...Buy Metals...Buy Metals....and nothing.  Maybe it would have been much better to be on the other side of the fence...selling metals and trading metals as a fear monger? Not hording as I did.  LOL.  Oh well....I blame myself.  At least I have a ton of Metals.

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Remember....To the moon................NOPE.

BaBaBouy's picture

Money For Nothin', Chicks For Free ...

Giant Meteor's picture

Emm  yeah. that's the way to do it ..

back to basics's picture

So let me get this straight, QE for the bankers is good but QE for the people is bad.  

Oh yes,  I think I got it now. 

Giant Meteor's picture

No that is not it ..

Shit from shit, multiplied by more shit, is still shit ..

Two wongs, don't make a white ..

The entire thing. meaning money system, political etc., is a sham ..

Piling on the shambolic train, don't make it any less a sham ..

Not to mention the fact, it simply becomes another means of control, which is how we got here in the first place ,,

Take down the sham ..

Iskiab's picture

QE for banking doesn't work, but they can pretend it does. Inflation is tracked by increases in consumer prices, so by giving money away and none of it trickling down to your average joe they can pretend there's no inflation. All that inflates are things bankers/business spend money on like nothing and holding cash, asset prices, stock markets, etc...

If they gave money to people they'd spend it, and things they spend it on are tracked and will show as inflation.

Currencies are just a means to trade what's produced. Printings lots of new money ultimately dilutes the value of what's out there, hence why QE is theft from one group in the economy and given to another.

MEFOBILLS's picture

Printings lots of new money ultimately dilutes the value of what's out there

 

That is called seigniorage.

There is no seigniorage if production of goods and services goes up concurrently with the "Money printing."

How the hell do you think that China's economy was monetized?  China has four large state banks, and they print new money with loans, then later they forgive the loans.  This then makes a permanent money supply.

In the U.S. it is public defict spend money which then goes on to become the permanent money supply.

When there is latent productive capability, just sitting around idle, then the extra money as demand, will correlate to goods and services production with a small time lag.  The U.S. is not at full production.

This was a Mises article, so take it with a grain of salt.  

striped-pad's picture

Currencies are just a means to trade what's produced. Printings lots of new money ultimately dilutes the value of what's out there, hence why QE is theft from one group in the economy and given to another.

Correct. Look at the changes of balance sheets with QE:

  1. Transfer of financial asset, X, from someone to the central bank.
  2. Creation of new debt (central bank money) $Y from central bank to previous owner of X

Total effect on previous owner's net worth: − X + $Y

Total effect on central bank's net worth: 0

[Central bank is a corporation. Profits add to, and losses subtract from, its equity, which can be treated as a debt from a corporation to those people who gain from its profits and pay for its losses. Therefore:]

Total effect on rest of world's net worth: + X − $Y

Total effect on global net worth: 0

QE is simply a transfer of wealth. If one group of people is better off as a result, the rest of the world is worse off by exactly the same amount.

By the way, notice that the claim that "there won't be inflation because there are more goods and services for the extra money created" is completely fraudulent. That only works if those new goods and services are available to the people with the new money. If the government uses QE to buy a load of new hospitals, then you will get inflation unless the people with the new money can use it to buy the operating theatres and wards, and the services of the medical staff.

Edit: included quote to show I was agreeing with Iskiab, not MEFOBILLS

MEFOBILLS's picture

QE for the bankers 

 

QE was for the bankers.  It was a swap of Fed Reserve Keyboard money, for TBills.  This swap happened at the reserve level.  The banks and the FED have their own private little marketplace, called the overnight market.  There they remediate imbalances in ledgers, and buy and sell reserves. 

In terms of ledger mechanics, the private bank gets more dollars and has fewer TBills.  Their ledger still balances, hence it is a swap.

The FED creates more keyboard money, which is a liability to them.  On the other side of the FED double entry ledger is an asset, which is the new TBill that transferred from the private bank.

Another way to think of it is your savings account goes down, and your checking account goes up by an equal amount.

In the course of buying these financial assetts, our ((friends)) like Bernanke are influencing the cost of TBILL, by making it appear as if there is demand.  This demand then pushes TBill price.  T Bill price up, interest rates down.

Repeat to yourself:  TBill price up, Interest rate down.  That is the relationship, that QE swaps were targeting

When mortgage backed securities were pulled into a private bank ledger, they were then swapped for FED keyboard money.  MBS price was then made good at face value, despite the collapse of underlying home values.  Mortgage backed securities had Sheriff departments around the country looking for the robosigning scandal.  However, as soon as MBS were on-sold to FED, then the Sheriffs got punked.

It does no good to give certain ((tribes)) money power over your civilization.  Since their behavior is already criminogenic, then expect bad things to happen.  

Money spent directly into the real economy, to then stimulate goods and services production, would actually be a good thing.  If it were Treasury debt free money, then much of it will go to paying off overhanging debts.  When principle is paid down, the money disappears.

JRobby's picture

Corbyn should be freeze dried and run through a grinder.

adonisdemilo's picture

You'll need a big grinder if you include all his delusional supporters who most definitely live in cloud cockoo land.

silverer's picture

The caveat: The government gets to kill you if it doesn't work out.

DjangoCat's picture

Who'd a thunk we would get to negative interest rates to keep the ponzi going?

Well they have tried that and the picture is no rosier.  How low can you go?

Steroid's picture

After running out of other people's money you spend your kid's and grandkid's and so on.

Thatcher was not correct, socialists have no limits.

besnook's picture

corbyn is advocating for interest free money owned by the people and not the interest charging boe. it is not a bad idea in the scheme of the ponzi scheme. qe is not the bad idea even though it is a bad idea. the fiat money central bank ponzi scheme is the bad idea.

kochevnik's picture

Yes this article is a lie. New government projects obviously expand the economy. Indebting the people to private cabal obviously enslaves the economy and inevitably transfers title to said cabal. Thus there is England where no ownership only 100year leases from aristocrats. When people create their own money, economy actually prospers even with entitlements and benefits: https://youtu.be/JuP2hH0Kpro?t=533

The idea of 100% private party merely enacts the Marxist Central Banks including the USA Federal Reserve and ROthchild's Bank of England. Public trust must not be privatized. It is the money of the people. Debt to yourself cancels out, and can denote prosperity

FreeShitter's picture

Free bitcoins for everyone ....yay

Dewey Cheatum and Howe's picture

As we progress into the abyss of long term deflation, expect every nation to resort to this dysfunctional crap.

It's nothing more than payouts, to keep the natives from rioting...and TPTB are conifident that the blow back from taxpayers will be less gruesome and eaiser to control than the alternative.

History has been on their side, for the most part, probably not this time.

 

Clowns on Acid's picture

Dewey - Exactly. Now we know why the "illogical" and disastrous "open borders" and import a 1MM muslim "refugees" has been in play in the US and Europe since 2001. 

It accomplishes 2 things:

Creates another 30MM low skilled mouths (in US) to feed and then manipulate (or take to the streets likie Antifa without any Law enforcement response).

All 30MM will get credit cards and keep the "flow" going.

Its all becoming quite appparent. The CBs will be outed soon and then .... the end game begins,

BritBob's picture

Corbyn is deluded and believes in fairy tales -

Corbyn and the Falklands - Alicia Castro said regarding Corbyn: "In the end, he is one of 'ours'. Even today, when he comes to our embassy, he arrives with the same bicycle and the same enthusiasm. He is a friendly person with a sense humour, who knows how to listen." Alicia Castro, Argentinian ambassador quoted in Daily Telegraph 14 Sept 2015.

I understand that Mr. Corbyn favours a sovereignty share deal. Funny thing is, Argentina has never legally owned the islands. Falklands- Never Belonged to Argentina (single page):

 

https://www.academia.edu/31111843/Falklands_Never_Belonged_to_Argentina (1 page)

Sold a lemon. Still, why let a good old socialist cause get in the way of reality? 

silverer's picture

OK BritBob, why don't you make arrangements to tow the Falklands to right off the shore of England, so it can be watched over properly by a government that just exudes liberty, freedom, and prosperity? I hope the Falklanders like the weather there. Then, Argentina can send tourists to what I'm sure will be a successful government run attraction.

Jimbeau's picture

Socialists will NEVER learn... Today's biggest scam, here in The States, is the Tesla. Elon is reaping stupendous subsidies from our inflato-dollar because the leftists are just POSITIVE that a magical new battery will result from the infused billions for research. Where have we heard this story before. There is ALWAYS another reason for "the people's system" to be trotted out again. Screw the impractical human race.

OverTheHedge's picture

It sems to me that the best option would be to give free money directly to the people- UBI in other words. But, the obvious problem with that is the government doesn't have control. How can Jeremy be top dog, if the people decide what they want, without government assistance?

The good news is that, once the inevitable inflationary disaster hits, a hard-core right wing Thatcher look alike will sort out the mess. And go to war, and cause other problems.

Fake Trump's picture

People QE. Fucking and masturbating is people QE. 

Dre4dwolf's picture

Meh

More socialism.

The secret is, too many people in debt, not enough money circulating to allow growth while paying down the debt.

If they print money to allow people to discharge their debts, the economy will grow with mild inflation (because most of the inflation will go to vaporize debt).

 

silverer's picture

Once you lead the people into the trap and the door slams shut and locked, you no longer need to provide anything. All they got was the small piece of bait that lured them there. Anything else afterwards is at the discretion of the trapper. Lesson: Don't fall for the trap.

wwxx's picture

I'm glad the English labor party has figured this out well enough to get the idea published. 

 

I think it is the correct direction, heck if your going to hang Trillions of bonds out there, why not sell them to the public at large?  We can't buy those type bonds here in the United States of Pet Owners, as The Bernanke & Gueithner had all those stress tests to perform, as is the existing direction to this very day.  I comment posted long time ago here at ZH about the public venue having the QE shelled out to the public, but I can't find that post.

hooligan2009's picture

the pubic at large does not have the money to buy the debt.

the money has come from money printing - monetizing the deficits and not preventing the increase in debt.

in other words, "the public" you refer to, are banks that borrow the money from the central bank or create it out of thin air.

deficits are the issue and represent stealing the future to spend today - the spending is living beyond the means to pay for it.

deficits accumulated into debt are the problem, qe is not the solution either by central banks or governments.

 

wwxx's picture

"the pubic at large does not have the money to buy the debt." ~~~hooligan2009   I don't agree, as a people, a country, and entity, I think it should be 'the public' that controls to great extent--the actual funding of the public's government.  [May I say now, that very little seems to be published on the internet about what Corbyn's actual People's QE, would look like, there is however an extensive amount of opinions out there on the net, about what it might be, wikileaks does nothing but chase it's own tail trying to pen down Corbyn's actual proposal.]

 

And with that, the lack of an actual economic proposal published by Corbyn, other than a sensational title 'People's QE'...I have obviously jump straight into one of those Fake News accounting that doesn't really do anything other than widen Alice's rabbit hole.

 

"the money has come from money printing - monetizing the deficits and not preventing the increase in debt."~~~ hooligan2009  Of course I must agree, that in history this has become the new normal, the fact that things are this way, & therefore must be somehow correct.  To monetize government debt requires the selling of bonds...while I suppose that is true, the difference here, [and I'm speaking of my opinion now, NOT CORBYN'S] ...the difference here could be: to sell such government bonds directly & exclusively to the English public in as the first & rightful owner of such bond & the value thereof.  Does that not necessitate that the government is indeed subject to the English public's buying power?  I think to the exclusive public...yes, that is the citizens themselves, become the first in a long term of usage.  Can we not agree that 'the bond' will be useful for a specific term of time, lets say 2 years, 5, or even 10 yr. duration, as plainly stated on the face of the bond upon issuance.  Well doesn't this foster a form of grass roots populous based monetary governance?  The English public's responsibility to the secondary sale of such bonds is completely their own decision, a popular decision.  And as such some will sell their bonds straightway [perhaps to help themselves], some will hold the duration [perhaps to help their government], & some will decide to sell at some point in between [perhaps in time of national emergency].

 

I suppose it should be said, that at the on-set of such a thing, the population must decide the size of such traunches of bonds to be sold to the English public.  Some will consider that inflation is based upon the overall offering within a time, some will seek to increase the government's annual budget, some will choose to keep it about the same, and some will demand to reduce the government's annual allotment from the initial sales of these bonds.  Remember the governments themselves as political entities, decide how & where to spend their money, but the People's QE really should only be about the available hard currency --the printing, & destruction, & use thereof.  So to clutter the matter with deficits and debts, existing or future, I think is beyond the scope of the People's QE.  The sales of the bonds to the initial English citizen, will have dramatic effect upon the government's other sources of revenue & even taxes, but basically this Peoples QE exclusive bond sales should be directly & equally correlated to actual printed currency.  If ya only sell 1 billion in the first year exclusively to the English public, then the Treasury must be bound, by law, to create that same amount, for that year, as well as remove that same amount that year of old tattered currency.  The balance as far as I can see would be for that year -0-  one billion in bonds were exclusively sold, one billion in new currency was printed, and one billion of old tattered currency was destroyed.  Sigh--sounds reasonable I guess, I'm sure I'm missing something important at this point, I suppose some will refuse to buy the bonds whatsoever.

 

And as there needs be, as there are the rich, the middle, and the low, I suppose there should be a limit to bond buying, so that every citizen may purchace, but so that the rich are unable to shut out the auction...hummm not sure how that would work exactly.  But it would be nice to be fair & yet reflect real competitive bidding, It would be a shame if Lord WhattheLuck was just to daRn silly to buy everything in sight. [yes they exist & they vote]  LOL

 

"in other words, "the public" you refer to, are banks that borrow the money from the central bank or create it out of thin air."~~~hooligan2009  Well no, I probably should of made that more clear in my initial comment, but 'the public' is the actual citizens of England exclusively, as the first owners of the bonds.  This only includes businesses as it is limited to the owner and employees, but the business entity is not a citizen, the bank is not a citizen, the investing house is not a citizen, the credit card companies are not citizens, the international firms are not citizens.  I realize in the new normal times, what constitutes a non-citizen must be defined, as anyone or anything that doesn't actually reside as a bonafide citizen of the country.  That definition is mine, I'm sure the English have already defined 'a citizen' & 'the public' specifically.

 

I suppose the banks will continue to launder tattered currency for new currency, as they generally do...but it must be equal one for 1 laundering, there should be no clerical nor handling fees allowed...but heyyyyyyyyyy that is a government decision not 'the public'.  Will the banks, and investment firms, and credit card companies, and international playerz have something left to do...I'm sure they will find something.

 

"deficits are the issue and represent stealing the future to spend today - the spending is living beyond the means to pay for it."~~~hooligan2009  I suppose you are correct, but People's QE in my opinion shouldn't be about deficits, accounting manipulations, and in general the prevailing practices of fraud.  Keep the People's QE, simple, straightforward, and accurately accountable to all.  I agree inflationary trend, generally intentional have become destructive to the currency value...I suppose that is true.  But again, I think those type things are beyond the scope of what I have proposed here, as if Corbyn's People's QE, probably doesn't resemble my opinion at all, but I couldn't quickly find what Corbyn's intentions about this actually are. 

 

"deficits accumulated into debt are the problem, qe is not the solution either by central banks or governments."~~~hooligan2009  Tis true deficits accumulated into debt are the problem, but no amount of People's QE is going to somehow fix the nature of politicians.  But what if, the People's QE resembled my opinion of it?  The hard currency would become the public's responsibility.  As the people buy, hold, & sell their bonds, they might be able to control something.  They might even consider using the power of legal tender to strike the government, the corporate, the banks, the international, and even each other, but the People's QE as I imagine it might be, is primarily regulatory, let them make wise decisions on what to do with their bonds, for the good of their country, their people, and their commerce in general.

 

Now one Englishman traded his People's QE bond, domestically for a domestic produced product,  And another Englishman held his bond under the mattress loyal to his government, and a third Englishman traded his bond internationally to bring the uncommon things into his realm.  A fourth Engishman had his bond stolen, and fifth thought it for a tithe, the sixth bought lace for a lady, and the seventh spend it on Rye.   hahaha

 

wwxx

 

 

 

 

 

 

 

 

Bam_Man's picture

"Give them just enough to keep them quiet, not enough to make a difference."

factorypreset's picture

I am only in favor of QE when it helps bankers and corporations - let's face it - they really know what to do with the money (stock buyback) in order to make the stock market go up.  When the stock market goes up it means the economy is better.  Duh!  

factorypreset's picture

This is also another reason we need central bankers and NOT politicians guiding us through these difficult economic times.  For example until Janet Yellen pointed it out I didn't understand that if I didn't want to be poor I should be rich instead.  This is the kind of thinking we need!  

 

hooligan2009's picture

central banks serve no useful purpose other than to employ central bankers.

these guys would do a better job ad would be far more entertaining.

https://www.youtube.com/watch?v=jZ572yLH9sc

if you seriously think that central banks have any control over inflation, employment or growth, why is there so much debt?

factorypreset's picture

Sorry I should have put a "/s" tag to let everyone know I was being sarcastic.  I thought my statement about Janet Yellen telling people to simply not be poor would be a pretty big giveaway.  

hooligan2009's picture

apologird.. it id getting increasngly difficult to tell when libtard socialsit fuckwits state complete bollocks as if there actually was a magic money tree and the mantra of "do no work, pay no tqxes, print money" was something that could be attained simply by voting for stealing from your neighbor.

mjcarr51's picture

efficient public bodies

shizzledizzle's picture

Not saying I support the measure but it does go to show how morally bankrupt the global system is. If everyone playing by the same set of rules "breaks" the system (I.E. loans at zero or near zero interest and money out of thin air to cover poor investment/spending decisions) then it isn't a system, its organized crime. 

gregga777's picture

Government are the original organized crime syndicates. Organizations like the Mafia are comprised of people who couldn't make it in government organized crime.

smacker's picture

The British Labour Party has always had a policy of state ownership of major industries, including railways and transport, telecoms and utilities etc etc. That was a proven disaster and Thatcher privatised most of it. Although these industries remain in a sort-of mess (especially British Telecom due to its unchanged internal culture), they are better than under state ownership.

Corbyn is a full-on in-your-face Marxist nutter.

He doesn't simply want to re-nationalise these industries - which would be a disaster in itself - he wants to nationalise the whole economy with his Public Investment Bank which would simply be a money-tap pouring out funds to build anything and everything that his cronies asked for. And you can bet that a vast majority of the wasteful spending would go into Labour Party voting strongholds.

The opportunity for cronyism and plain corruption in this idea are enormous.

It's right up Left Street.

gregga777's picture

Private industry allowed to exist as monopolies or oligopolies are no better than state ownership and in most cases far worse. See the following for examples how Mexicans have become even more impoverished, and the rich have become even richer, after state enterprises were privatized:

Paradise for Oligarchs: Poverty, Inequality Soar as Wealth Rises

http://wolfstreet.com/2017/08/18/mexico-paradise-for-oligarchs-poverty-i...

smacker's picture

I agree with you and although in the UK there is some competition to BT on some services, it nevertheless dominates the market sector but it's internal culture of arrogance and incompetence has not changed since the days of state ownership.

We see similar problems in the US with the likes of Micro$haft and Goolag who dominate their market sectors, and don't we know it(!)

Seems to me that anti-trust laws need serious attention.

INTJ Economist's picture

"Corbyn forgets that the public sector cannot exist without private sector revenues."

Quite the opposite, actually.  Where do you think GBP comes from?  Who creates money (aside from commercial banks, when they make loans)?  The Bank of England creates the GBP.  They don't need private sector revenue to operate.

smacker's picture

Right. You propose a monetary system whereby .gov just keeps printing and spending as it wants.

What's it backed by?

Where do The People get their money from?

And what inflation would we suffer under this glorious utopian plan?

Wouldn't it be cheaper just to declare toilet paper a valid currency?

east of eden's picture

What is the US dollar 'backed by'?