Thursday, 23 January 2014

Ice-cream money

I overheard a mother explaining money to her kid in terms of ice cream. If you don't have any and you see everyone else eating it it makes you upset. But if you have too much then it can make you unhappy. The trick is to have some in the freezer so, when you fancy it, you can have a small amount as a treat.

That's sweet, I thought. I'll remember that. Then I got to thinking that money really should be more like ice cream.

Too much money should make you physically sick.

You should be allowed to make your own money, but it should be really difficult and, no matter how much you churn it, never quite resemble the real thing.

Money should be of great interest to children, but as you grow older you should lose the taste for it except on really hot days or when someone gets you some as a surprise and you remember that you really quite like it.

Money should melt unless you spend it quickly.

This last idea has frequently been suggested by economists (e.g. Oxford economics professor Simon Wren-Lewis) as an alternative to quantitative easing (QE). QE involves inventing money and giving it to your banker friends and hoping they will share it with businesses (hint: they won't) who will use it to pay staff (hint: they won't either) who will spend money (hint: even if it gets to them they will probably put it in a bank because they'll need savings when they lose their job) to get the economy moving. 

QE doesn't really work, for the reasons hinted at above. An alternative is helicopter money. Whereby money is invented, as above, but given straight to the people (figuratively 'dropped out of a helicopter'). To stop people squirreling this money away for a rainy proverbial, the free cash is time-limited. Unspent, it melts away - like ice-cream.

1 comment:

  1. Your theory sounds wonderful, but (and mostly to play devil's advocate), surely if you gave every person in England a £10,000 windfall, most of them would spend it repaying a loan they took out from the bank (or on the things they would have bought anyway, so they can pay the 'other' money back to the bank instead), so all the "spare" money would end up with the banks anyway? JR