The new Labour leader, Jeremy Corbyn, has said that a Labour government would introduce “people’s QE”, that is to say, increased government spending, perhaps on infrastructure, financed with printed money.

What on earth are we to think about this, and indeed QE generally?

I will endeavour to shed some light. But I should warn you that the vagaries of QE present what Sherlock Holmes would have described as a “three-pipe problem” – and possibly four or five.

Despite some people’s serious fears (not including yours truly), apparently QE hasn’t been inflationary. The most recent inflation figure is 0.1pc, and it may turn negative by Christmas.

Yet QE probably has caused inflation to be higher than it would otherwise have been. This effect is not visible because of the profound disinflationary forces at work in the world, and the still damaged banking system, which has not fully responded to the monetary stimulus.

In principle, though, once the system returns to some sort of normality, the expansion of the central bank’s balance sheet by four times should put us – and the authorities – on inflation alert.

In practice, higher inflation need not materialise since QE can be reversed. Central banks simply have to sell bonds back to the markets. There clearly are difficulties in doing this without causing serious instability in financial markets. But it can be done.

David Fuller's view

Here is a PDF of The Telegraph article.

QE has inevitably caused some inflation, as was intended, most notably in stock markets and house prices.  This has helped to avoid a more serious asset price deflation which would have further damaged consumer sentiment. 

I will leave aside the somewhat contentious issue of whether or not this has made economic problems worse over the longer term, as Roger Bootle’s column is more about UK Labour Party leader Jeremy Corbyn’s policies, should he ever have an opportunity lead a UK government. 

Corbyn is polite and sincere in his views, and he gains respect for saying what he thinks.  Too many politicians lack these qualities. 

However, Corbyn is a hard-left union man who would redistribute assets rather than enable the economy to create additional wealth.  His tax policies would reverse the flow of talent and capital to this country.  Under Corbyn’s policies the UK would slide down the ladder of global economic development, just as we have seen with other countries ruled by radical leftwing governments, from Europe to South America. 

Fortunately, Corbyn’s Labour Party should be unelectable, provided the Conservative government maintains its ‘one nation’ policies and avoids complacency.