One of the most common answers I get is that the Bradbury pound is just quantitative easing – that is, there's no need to discuss Bradbury because the Bank of England is already doing it. This is, of course, nonsense.
Ironically, another answer given by MPs was that the Bradbury pound policy would cause inflation.
But if you look at the Bradbury Pound = QE or Bradbury Pound = inflation debate, they also argue that QE is fine because it doesn't cause inflation. It's not clear how they can be both sides, but maybe that's to be expected as politicians.
Quantitative Easing
QE (Quantitative Easing) is a process that central banks, including the Bank of England, are using to rescue a failing financial system. It is considered an “unconventional monetary policy” that can be used to “stimulate” the “economy” when normal monetary policy is not working. In other words, it is an emergency measure.
QE happens when a central bank buys up government bonds using “money” that didn't exist before. In other words, it's the process of injecting money into the monetary system with no specific purpose other than some vague notion of “stimulus.” And the central bank just sits back and hopes it works. What that work is, they have no idea.
So far, the Bank of England has bought bonds mainly from financial institutions such as banks, insurance companies and pension funds, most of which have been affected by the financial crisis and, at least in the case of banks, have gone bankrupt.
That would then lead banks (for example) to take that money and lend it out to the real economy. The evidence that QE is working is that the amount of money in circulation increases. What actually happened is that banks hoarded the money, causing money in circulation to contract for a few years after the 2007/2008 crisis. But in any case, even if banks had done what they were supposed to do and lent out the new QEd money, what kind of loans would they have made? Would there be more speculative mortgages?
If quantitative easing had worked, it would have exacerbated the problems that led to the 2007/2008 financial crisis.
Is this common knowledge?
Bradbury Pond
QE is a bailout, nothing more, nothing less. But if we look back at history we can see that the Bradbury Pound was also a bailout, with a difference: it established the principle of sovereign credit issued by the Treasury. The fact that that sovereign credit was used to bail out banks is irrelevant. It set a precedent.
It is true that if the Bradbury Pound were reissued as a new bailout package, it would not be better than QE. No, but it is not better.
That is not what is being proposed.
The key question is, for what purpose should the credit issued as Bradbury Pounds be used?
Money created out of thin air under QE policies simply floats around the financial system, to be spent or not spent at the whims of private banks, whereas Bradbury will be used for a very specific purpose – productive projects to rebuild the UK's basic economic infrastructure, directed by the government and held accountable for its success or failure.
Economics vs. Finance
The economy is not the financial system. Mainstream media commentators routinely use the two terms interchangeably, as if the economy and the financial system were the same thing, which they are not.
The economy is real, physical things: physical raw materials are turned into physical products, transported on physical trains and trucks, and sold in physical stores — none of this could happen without a physical energy supply, a physical water supply, physical roads, railroads and bridges.
Our energy, water and transport infrastructure is collapsing. Our health services and education systems are collapsing. Our basic infrastructure and workforce are not fit for purpose.
The Bradbury pound would then be applied directly to this problem as Treasury issued national credit, rather than being swallowed up by a failed financial system and later exploding into rampant hyperinflation.
If Bradbury focuses on rebuilding our crumbling infrastructure, it would be a huge boost to the UK's real economy. Modern energy technologies would bring down the unit price of energy, a key input cost for all types of business. A modern and efficient transport system would have the same effect. Will this cause inflation?
This kind of investment has only one effect: it fuels the rest of the real economy: real, productive apprenticeships, long-term, productive jobs. For the first time in generations, young people will be able to imagine a brighter future that doesn't involve taking a menial job they hate so they can drink their way through the weekend and blow their money. The goal should be to give people jobs that they want to get up to in the morning.
exchange rate
Another pathetic comment from politicians is that we need to set an exchange rate between the “Bradbury Pound” and Sterling. This is complete nonsense. What we are discussing here is credit issued by the Treasury, which will be issued as British Pound Sterling just like the original Bradbury Pound.
Support issues
Finally, anyone who throws around the words “Bradbury” and “inflation” inevitably also mentions the problem of money being created out of thin air and “backed” by nothing. That is QE, clearly not Bradbury.
As defined above, Bradbury is not backed by anything. It is certainly not backed by gold. It is backed by something much better than gold. It is backed by the state. It is backed by us – you and me – and the assets we have built.
In other words, it's our productivity and the actual physical assets that we build — our power plants, our reservoirs, our railroads, our workforce. That's where the real value is.
