Quantitative easing and debt monetization

March 12, 2009 11:40 a.m.

One of the more fascinating if esoteric areas of policy debate concerns the central bank technique of quantitative easing and debt monetization.
I have written about this on a number of occasions over the years beginning with my first draft of Hysteria and the Deficit done as a monograph originally for the Canadian trade unions in 1983. A revision of the document was published in 1984 by the Canadian Centre for Policy alternatives.

I elaborated on the argument in the Deficit and Debt Management in 1989 also published by the CCPA in Ottawa.I developed the argument further in various articles in collections edited by   Jim McCrorie and M.MacDonald for the Canadian Plains Research Centre on the future of the Prairie and Atlantic   regions at the University of Regina in 1992 and for Danny Drache for a collection on Ontario and the NDP government in 1992 and for an excellent collection on globalization and the future of the state edited by Drache and Robert Boyer in 1996.

I also presented the same argument to a conference organized by the Association of Canadian business economists in Ottawa in April 1994 where I debated economic policy with the then Federal associate deputy minister of Finance, Don Drummond. Whenever I presented the argument at the conferences that preceded the publication of the books I was met with curiosity and some scepticism about the practicality of what I was proposing even though I always took the trouble to show that there was considerable statistical evidence that the approach was not necessarily inflationary and hence a potential practical and theoretical possibility.

I recall the very sceptical reception I received from my former teacher Meghnad Desai at the L.S.E. when I explained the argument to him in the spring of 1993 in London just after the birth of my daughter Jessica.

I am very pleased to note that these ideas and theories which I first wrote about in depth more than 20 years ago and argued on behalf of are now creative techniques that have been embraced by the U.S. Federal Reserve and the Bank of Japan and under consideration by other central banks to fight the deep global slump that we now are facing. My work as always built upon the earlier suggestive work of others including Keynes and his circle and the work of Abba Lerner. But as far as I know I was one of the very first economists to suggest and present evidence for the argument that central bank purchasing government debt was a sensible policy in a deep slump and not necessarily inflationary. It takes far too long and it is a taxing struggle but in the end good ideas will see the light of day.

Select bibliography:

Harold Chorney, The Deficit, hysteria and the current crisis, Ottawa, Canadian Centre for policy alternatives, 1984 reprinted in Harold Chorney and Phillip Hansen, Toward a Humanist Political Economy, Montréal&New York,Black Rose , 1992.

Harold Chorney, The Deficit and Debt Management:An Alternative to Monetarism, Ottawa, The Canadian Centre for Policy Alternatives, 1989.

Harold Chorney, A Regional Approach to monetary and Fiscal Policy in J.McCrorie and M.MacDonald, the Constitutional future of the Prarie and Atlantic regions of Canada, Canadian Plains research centre, University of Regina, 1992.

Harold Chorney Deficits - Fact or Fiction ? Ontario's Public finances and the Challenge of Full Employment in Daniel Drache, Getting on Track, social Democratic strategies for Ontario, Montréal:Mcgill-Queen's University Press, 1992.

Harold Chorney, Debts, Deficits and Full Employment, in Daniel Drache and Robert Boyer, States against Markets, The Limits of Globalization, N.Y., Rouledge, 1996.