Bradbury Pound: QE By Another Name?

As people ask more questions of Parliamentarians and others about the Bradbury Pound and the policy it represents, the usual, pathetic, stock answers are thrown back at them. Lets deal with them ...

One of the most common answers that is thrown back is that the Bradbury Pound represents nothing more than Quantitative Easing. The implication is that since the Bank of England has already implemented QE, there is no need to discuss the Bradbury. This is, of course, nonsense.

Ironically, the other answer thrown back by Parliamentarians is that the Bradbury Pound policy would create inflation.

Yet if we look at these arguments, that the Bradbury Pound = Quantitative Easing or that the Bradbury Pound = Inflation, they also argue that QE is ok because it doesn’t cause inflation. It’s not clear how they can have it both ways, but perhaps that comes with being a politician.

Quantitative Easing

QE, or Quantitative Easing, is the process being used by central banks including the Bank of England to bail out their bankrupt financial system. It is considered an “unconventional monetary policy” which can be used to “stimulate” the “economy” when normal monetary policy doesn’t work. In other words, it is an emergency measure.

QE happens when central banks buy up government bonds, using “money” which previously did not exist. In other words, it is a process of pumping money into the financial system for no other particular purpose than some vague notion of “stimulation”. They then sit back and hope that there is an effect. They have no idea what that effect might be.

So far, the Bank of England has mainly bought up government bonds from financial institutions, for example banks, insurance companies and pension funds; mainly those affected by the financial crash, and which, in the case of the banks at least, are bankrupt.

What’s supposed to happen then is that the banks (for example) take that money and lend it into the real economy. The evidence that QE was working would be a larger amount of money in circulation. What actually happened was that banks hoarded that money instead, and for a number of years following the 2007/2008 crash, there was a contraction of money in circulation. But in any case, even if the banks had done what they were supposed to do, and had lent the new Quanitiatively Eased money, what kind of loans would they have created? More speculative mortgages?

If Quantitative Easing had worked, then, it would have resulted in an expansion of the problem which caused the 2007/2008 financial crash.

Is this common sense?

The Bradbury Pound

QE is a bail out. Nothing more, nothing less. Yet if we look at the history, we find that the Bradbury Pound was a bail out as well - but with a difference. It established the principle of Treasury issued national credit. The fact that that national credit was used to bail out banks is irrelevant. The precedent was set.

It is true to say that if the Bradbury Pound were to be reissued as another bailout, then it would be no better than QE. Different, but no better.

That’s not what is being proposed.

The key question is, what should any credit issued as the Bradbury Pound be used for? 

The money created from nothing under the QE policy is just left to float around the financial system, to be used or not at the whim of private banks. The Bradbury, on the other hand, would be used for a quite specific purpose - productive projects to rebuild the basic economic infrastructure of the UK. This would be directed by government, and government held to account for its success or failure.

Economy -v- Finance

The economy is not the financial system. Mainstream media commentators constantly use the terms interchangeably as if they are the same thing, but they are not. 

Economies are real, physical things. Physical raw materials turned into physical products, moved in physical trains or lorries, sold in physical shops. None of that can happen without physical energy supplies, physical water supply, physical roads, railways and bridges.

Our energy, water and transport infrastructure is crumbling. Our health service and education systems are crumbling. Neither our basic infrastructure, nor our workforce, is fit for purpose.

The Bradbury Pound, then, as Treasury issued national credit, would be applied directly to this problem; not left to  be swallowed up by a bankrupt financial system, only to burst free at a later date as rampant hyperinflation.

With a Bradbury directed specifically at rebuilding our crumbling infrastructure, the UK’s real physical economy would get a massive kick. The latest energy technology would see the unit price of energy fall - a key input cost for businesses of all types. Modern, efficient, transport systems would have the same effect. Is this inflationary?

This type of investment can have only one effect - to act as a driver for the rest of the real economy. Real, productive apprenticeships; long term productive jobs. For the first time in a few generations, our young people would see a positive future for themselves which does not involve existing through a mundane job they hate so that they can afford to drink their money away at the weekends. The aim should be to offer people jobs they want to get up for in the mornings.

Exchange Rate

Another pathetic comment from politicians is that an exchange rate would have to be set between the “Bradbury Pound” and Sterling. This is just nonsense. What we are discussing here is Treasury issued credit, which would be issued as Great British Pounds Sterling, just as the original Bradbury Pounds were. 

The Issue Of Backing

Finally, those who mention the words “Bradbury” and “inflation” in the same breath inevitably also mention the problem of money being created from nothing and “backed” by nothing. It should be clear that that is what QE is, and what the Bradbury isn’t.

The Bradbury, as defined above, is not backed by nothing. It’s not backed by gold, of course. It’s backed by something much better than gold. It’s backed by the nation. That’s us - you and me - and the assets we build. 

In other words: our productivity and the real, physical assets that we build. The power stations, the reservoirs, the railways, our sweat equity. This is where true value lies.