Interfluidity: Some thoughts on QE
QE only works if it makes asset prices rise, and it is only conducted while it makes those prices rise in real and not just nominal terms.
In the same way that you might put Andrew Jackson‘s face on a Federal Reserve Note, you might describe QE as the most “Kaleckian” form of monetary stimulus, after this passage:
Under a laissez-faire system the level of employment depends to a great extent on the so-called state of confidence. If this deteriorates, private investment declines, which results in a fall of output and employment (both directly and through the secondary effect of the fall in incomes upon consumption and investment). This gives the capitalists a powerful indirect control over government policy: everything which may shake the state of confidence must be carefully avoided because it would cause an economic crisis.
Replace “state of confidence” in the quote with its now ubiquitous proxy — asset prices — and you can see why a QE-only approach to demand stimulus embeds a troubling political economy. The only way to improve the circumstances of the un- or precariously employed is to first make the rich richer. The poor become human shields for the rich: if we let the price of stocks or houses drop, you are all out of a job.