Central Banks Can Print Prosperity

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Wednesday, November 18, 2015

Central banks all around the world have been printing money. This policy, known as quantitative easing in banker jargon, has driven up the price of stocks and bonds. But will it lead to real and sustainable increases in global growth, or is it sowing the seeds of future inflation?

  • Roger Bootle 90px

    For

    Roger Bootle

    Executive Chairman, Capital Economics

  • Simon Johnson 90px New

    For

    Simon Johnson

    Professor, MIT & Fmr. Chief Economist, IMF

  • Conard90px

    Against

    Edward Conard

    Visiting Scholar, AEI & Former Partner, Bain Capital

  • Andrew Huszar90px

    Against

    Andrew Huszar

    Sr. Fellow, Rutgers Business School


    • Moderator Image

      MODERATOR

      John Donvan

      Author & Correspondent for ABC News

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Roger Bootle 90px

For The Motion

Roger Bootle

Executive Chairman, Capital Economics

Roger Bootle, one of the City of London’s best-known economists, is the executive chairman of Capital Economics, which he founded in 1999. Additionally, he is a specialist adviser to the House of Commons Treasury Committee and an honorary fellow of the Institute of Actuaries. He was formerly group chief economist of HSBC and, under the previous Conservative government, he was appointed as one of the Chancellor’s panel of Independent Economic Advisers, the so-called “Wise Men.” In 2012, Bootle and a team from Capital Economics won the Wolfson Prize, the second biggest prize in Economics after the Nobel. Author of The Trouble with Europe (2015), he has written many articles and several widely acclaimed books on monetary economics, appears frequently on television and radio, and is a regular columnist for The Daily Telegraph. He has a long and distinguished record of successful forecasting of major events and market movements, often in contrast to the prevailing orthodoxy of the time.

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Simon Johnson 90px New

For The Motion

Simon Johnson

Professor, MIT & Fmr. Chief Economist, IMF

Simon Johnson is the Ronald A. Kurtz Professor of Entrepreneurship at the MIT Sloan School of Management. He is also a senior fellow at the Peterson Institute for International Economics, a co-founder of BaselineScenario.com, a member of the FDIC’s Systemic Resolution Advisory Committee, and a member of the private sector systemic risk council founded by Sheila Bair. In 2014, he joined the Financial Research Advisory Committee of the U.S. Treasury’s Office of Financial Research (OFR). From 2009 to 2015, he was a member of the Congressional Budget Office's Panel of Economic Advisers. Johnson has published more than 300 high impact pieces in New York Times, Bloomberg, Wall Street Journal, Financial Times, and many other outlets. He is the co-author of several books, including White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You (2013). Previously, he was the International Monetary Fund's chief economist and director of its research department.

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Conard90px

Against The Motion

Edward Conard

Visiting Scholar, AEI & Former Partner, Bain Capital

Edward Conard is a visiting scholar at the American Enterprise Institute, where he works on US economic policy — in particular, on the effect of taxes, government policies, and finance on risk-taking and innovation. Conard is the author of the New York Times bestseller Unintended Consequences: Why Everything You’ve Been Told About the Economy is Wrong (2012). Since its publication, he has made more than 150 media appearances and has debated major economists, politicians, and journalists, including Paul Krugman, Joseph Stiglitz, and Jon Stewart. His second book, The Upside of Inequality: How Good Intentions Undermine The Middle Class, is slated to be published by Penguin Random House in 2016. Formerly, Conard was a founding member of Bain Capital, where he was in charge of the New York office and responsible for the acquisitions of large industrial companies. Previously, he worked for Wasserstein Perella & Co., an investment bank that specialized in mergers and acquisitions, and Bain & Company, a management-consulting firm, where he led the firm’s industrial practice.

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Andrew Huszar90px

Against The Motion

Andrew Huszar

Sr. Fellow, Rutgers Business School

Andrew Huszar is a senior fellow at Rutgers Business School, where his research focuses on the evolving intersection between government and the financial markets. Until June 2012, he was managing director and U.S. head of OTC derivatives client clearing for Morgan Stanley. Before that, Huszar worked during ten years over two different stints at the Federal Reserve Bank of New York (FRBNY). In his last Fed position, Huszar managed the $1.25 Trillion Agency MBS Purchase Program, the centerpiece of the first round of “Quantitative Easing” (QE1). He managed the program's portfolio design and trading strategy, as well as the creation of a permanent, in-house Federal Reserve AMBS trading platform. Previously, Huszar was both a bank regulator and attorney at the FRBNY. Huszar also worked on Wall Street at RBS Greenwich Capital as the co-head of a Transaction Advisory Group advising the bank’s trading businesses on the Basel II Capital Rules.

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Declared Winner: Against The Motion

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Voting Breakdown:
 

47% voted the same way in both pre - and post-debate votes(16% voted FOR Twice, 24% voted AGAINST Twice, 7% voted UNDECIDED Twice). 53% changed their minds (5% voted AGAINST then changed to FOR, 14% voted UNDECIDED then changed to FOR, 11% voted FOR then changed to AGAINST, 19% voted UNDECIDED then changed to AGAINST, 2% voted FOR then changed to UNDECIDED, 2% voted AGAINST then changed to UNDECIDED)| Breakdown Graphic

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    13 comments

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    • Comment Link Frank Saturday, 12 December 2015 18:39 posted by Frank

      It is good to see even liberals stumbling to an obvious answer. If we could print money for prosperity every country would be doing it and we would all be rich. This question is not really up for debate it is just that some ignorant people just do not understand the role of money in an economy. Printing money long term leads to total disaster and poverty.

    • Comment Link Ryan Preston Tuesday, 01 December 2015 17:17 posted by Ryan Preston

      Ask a stupid question, get a stupid answer.

      Monetary policy is complicated subject and debating such a ludicrous strawman of a proposition will almost certainly not lead to anything enlightening.

      On the other hand, using the moralistic tone that conservatives have come to expect from their pundits on this suite of issues might draw people in.

      But I'm gonna skip this one.

    • Comment Link David Brownlow Wednesday, 25 November 2015 20:33 posted by David Brownlow

      This podcast was frustrating to listen to. The side for the motion never addressed the question. It was as if they believed the question was 'Should central banks use monetary policy to combat a crisis?' One could almost question if they even knew what the word prosperity meant.

      How did no one ask, if QE was the road to prosperity, why at this point are not swimming in prosperity with all the money weve printed? How did that work for every other country that has tried it in history? (Not well).

    • Comment Link Bert Frederich Wednesday, 25 November 2015 18:00 posted by Bert Frederich

      I had trouble with the style/tone of this particular debate. What is normall a calm and logical setting was replaced by raised voices and consistent appeals to authority. I am not an economist but this debate did not teach me as much about the issues as other debates have in the past.

      I still love this program because it is usually different from other issues debates. IQ^2 is where logical points are made based on facts and cool heads not only prevail, but set the tone of the whole discussion.

    • Comment Link George stockus Friday, 20 November 2015 15:59 posted by George stockus

      QE underwrites govt borrowing costs, erases needed sovereign credit risk pricing and fiscal discipline...how can this lead to prosperity? It simply delays or obfuscates the inevitability of compounding debt burden.

    • Comment Link Matthew Friday, 20 November 2015 02:09 posted by Matthew

      Halfway through. So far it's a surprisingly terrible debate. I've never seen such angry argument over such minor differences.

    • Comment Link CharlesD Thursday, 19 November 2015 14:18 posted by CharlesD

      Those in the debate never explained that "QE" subtracts money from the private sector. The banks get the reserves and lose the bonds. Their financial assets are unchanged and they lose about $80B of interest income annually. Instead, both sides talked about "money printing" with the inference that more money is being added to the system - which is not true. Hence, the audience could not make an intelligent choice since QE was not explained sufficiently in the first place.

    • Comment Link Robert Thursday, 19 November 2015 11:04 posted by Robert

      Printing money is theft from the currency holders, i.e., savers. To print money, you produce nothing. You simply take (steal) from those who have already received purchasing power from their production.

    • Comment Link raul Thursday, 19 November 2015 02:37 posted by raul

      19 november 2015 manila,ph

      economy in an intelligent view,

      “avoided a second great depression”
      http://www.thestreet.com/story/13370289/1/if-central-banks-print-more-money-will-it-lead-to-economic-prosperity.html

      to all smart, brilliant economists.
      i am writing this for the record.
      question: is qe1, qe2 and qe3 from
      2008 to 2014 the correct, permanent,
      absolute, precise solutions to the great
      depression the second time around?
      answer: nope. it is a big mistake.
      question: why?
      answer: simple, qe1, qe2 and qe3 from
      2008 to 2014 are all and were all “debt”.
      question: then what are we waiting for?
      answer: twice, thrice, ten times or a
      thousand times the great depression
      of the 1930’s.
      thanks’

      facebook: thegreatdepression.part2@yahoo.com

      kindly please take good care and God bless . . . . . . . raul

    • Comment Link Edward Tomchin Wednesday, 18 November 2015 21:00 posted by Edward Tomchin

      Quantitative easing (priming the pump) to the banks and other large financial institutions was a wise move. If any more than Bear Sterns and Lehman Bros had gone down, the rest would have followed in the whirlpool created. And that most of that cheap and quick money was invested and made the bankers a profit was also good. That the investors, bankers and other financial institutions keep their greed going may also have been alright since they likely saw the size of the coming economic growth with the addition of another 6 billion people into the marketplace as workers and consumers, they probably just wanted to make sure they had sufficient capital to stay in the game.

      Now that that has been achieved, it's time for the broad middle-class to have a chance at some wealth. Wages have been flat for more than 20 years. That needs to be ended. Wages need to grow if the economy is two grow. More educated workers need to be created. More jobs need to be created. TPP alone may take a few hundred thousand jobs away from us, but there are hundreds of billion of dollars in new markets for us to have at our disposal, which will create far more jobs than we lost.

      So, yes, quantitative easing was right for the big money boys but now the the broad middle classes who need to receive aid in the form of higher wages and more jobs. Remember, at a bottom line, people are the engine of any economy. Without us, the common men and women, going off to work each day producing all the goods and services that will be sold, then coming home and keeping house, raising families and spending that money, directly or indirectly, on the products and services we and others created ... there would be no economy, no wealth, no wealthy class. There'd be nothing. We'd quickly revert to cave and tree animals.

    • Comment Link rené thie Wednesday, 18 November 2015 18:43 posted by rené thie

      Money is always created from "thin air". Whether by private banks (through fractional reserve banking) or by national banks (by printing money). Seeing how most of the west suffers from a combination of high unemployment, low inflation and high government debt, actuall money printing (not QE) seems the most logical step. Especially in the EU.

      Looking forward to tonights debate

    • Comment Link John Deegan Sunday, 15 November 2015 21:41 posted by John Deegan

      The proposition is misleading. Prosperity, to me,is a sustainable state. QE may help on a temporary basis to prime the pump, but is not sustainable.

    • Comment Link Rafael Haddock Monday, 09 November 2015 13:47 posted by Rafael Haddock

      FED money printing can stimulate economic growth if money is invested in job creating ventures. If invested in Wall Street activities, not so much.

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