Quantitative Easing from 2009 set us back a fair way to 300 years ago when 200 families owned almost half the wealth of England of which half was owned by only a dozen families.
A pity! This sets in reverse the steady decrease in wealth differentials that had been going on since 1066 when, of course, William the Conqueror owned the lot himself. But, since 2009, the Bank of England (BoE)shovelled £375 billion into the economy. Saving the banks with a cash injection in order to fill the ATMs was one thing, the additional wall of money from 2009 onwards was quite another.
It was supposed to go into the economy, of course, in order to stimulate borrowing and spending by small and medium businesses and ordinary depositors, but only about £15 billion (abut 2.5% p.a.) actually got there. The bulk of it — £360 billion — ended up as useless money lying in the BoE or in the pockets of those who were already rich. QE thus served no useful purpose at all, only to temporalily reverse the ‘democratisation’ of wealth’ since 1066.
It’ll only be “temporalily” and will all come out in the wash one day. Some of it has done so recently with the collapse of commodity prices. Janet Yellen of the US Fed and Mark Carney of the BoE think that if they are able to keep on raising the basic interest rate up to, say 3% or 4%, then the rest of the surplus will be gently separated from its owners and everything will be back to normal.
It is unlikely to happen like that because there’s no great demand for money by the big manufacturers. They’ve already got too much money to know what to do with it — no new consumer products are on the drawing boards — or they’re already insolvent and only kept alive by the protective camouflage of their accountants and blind eyes of governmental regulators.
It is more likely that prices of many other things that the rich have invested in will collapse in the same spectacular way as commodities — property, shares, antiques and modern ‘serious’ art, luxury yachts, etc. The trend to wealth equalisation will resume– that is, among those in the advanced countries who have jobs. When it’s already been going on for a millennium at least in human history it’s hardly going to stay kin reverse mode as it has been since 2008.
Why has wealth equalisation been going on for a millennium past — and long before that, too? It is because economic systems since the earliest days of imperial plunder have become increasingly complicated and needing more specialists. The industrial revolution only accelerated what had been going on anyway. Increasingly the very rich need a panoply of experts around them in order to maintain their wealth. The latest tranche of experts — to add to the more traditional lawyers and accounts — are the scientists. They’ve been around for a long time but are only recently becoming essential in almost every economic activity.
Perhaps, when scientists come even more to the fore and start to make economics into a truly scientific subject, we might start to see government strategies that really have some constructive impact and put nonsense like Quantitative Easing behind us.