Paul Marshall, the cofounder and chairman of $US20 billion plus London-based hedge fund Marshall Wace, has delivered a derisive critique of quantitative easing in a Financial Times opinion piece.
In an article published Tuesday titled ‘Central banks have made the rich richer’, he said that the policy had bailed out “bonus-happy banks.”
Quantitative easing is where central banks buy up securities in order to lower interest rates and increase the supply of money.
The UK and the US implemented the policy in the aftermath of the financial crisis, while Japan and the European Central Bank have done so more recently.
Marshall said: “Banks have been the biggest beneficiaries, with their 20- or 30-times leveraged balance sheets. Asset managers and hedge funds have benefited, too. Owners of property have made out like bandits. In fact, anyone with assets has grown much richer. All of us who work in financial markets owe a debt to QE.”
He added: “It is no surprise that the left is angry about this, nor that they are looking for other versions of QE that do not so directly benefit bankers and the rich.”
Instead, he said he favoured a form of “people’s quantitative easing,” which has been advocated by Jeremy Corbyn, the new leader of the UK’s Labour Party.
The idea is that the central bank would buy bonds directly from the UK Treasury the next time the country faces a financial crisis — with the money to be spent on improving housing and transportation infrastructure.
He added: “QE had clear wealth effects, which could have been offset by fiscal measures. All political parties should acknowledge this. So should those of us who want free markets to retain their legitimacy.”
Read the full Financial Times article here.
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