The co-operative think tank in Spain, the Ekai Centre, is pointing to a new report from the Boston Consulting Group, which argues that inflation could be a better way to cut government debts than current austerity measures. The core argument is that fiscal retrenchment leaves the economy growing at a slower pace than the debts themselves, in which case the alternative ought to be fiscal stimulus and inflation, re-stoking the economy and eroding the value of the debt.
The third and more likely scenario to my mind says that we may end up with a mixture of the two – an official line of fiscal discipline, tough on inflation, but a reality, with loose monetary policy, that is the opposite.
Traditional inflation tends to be socially regressive, so are there better options? Can we see models of quantitative easing that are socially and environmentally more progressive than pumping liquidity through banks, to their advantage along the way? Quantitative easing through co-operative and mutual institutions, perhaps – which have a 20% share of the European banking market – or an ethical screening of banks that have access to the programme.
Debt is a scorecard that tells you over time who owes what to who. We are not all in this in together when it comes to the reckoning and it is high time to challenge how the burden of national debt is shared out.