Beyond Quantitative Easing (Towards a New Monetary Theory)

CNMT (Classical Neoclassical Monetary Theory) has defined monetary policy and the role of Central Banks for the last one hundred years. This book argues that it is time to change. It proposes a NMT (New Monetary Theory) which argues that Central Banks should be responsible for the whole relation between money and economic growth. For monetary policy it means that in regular times Central Banks will continue being guided by CNMT and QE (Quantitative Easing) should not be used. But in major crises like 1930, 2008, and 2020, NMT should be the guide and QE should be used extensively. NMT proposes that Central Banks should become even more independent and responsible for the productive economy, while traditional governments remain responsible mainly for the social economy. NMT argues that in major crises fiscal policy should only be limited to support the social economy - that one which does not have survival productive characteristics. And that extended QE, which we call in here the Monetary Credit Bazooka (MCB), should be used to support the productive economy - the one capable to receive and repay long term preferential loans. NMT implies a major revolution both in Monetary Theory and in Monetary Policy, but it is required both to have fast and efficient responses in major economic crises, and to avoid the inefficiencies associated with government spending and the unnecessary long term burdens to the tax payers which always imply unjust economic transfers.