Refugee’s – even this problem can be seen as an opportunity

Europe needs to find a long term solution to the influx of 'refugees'.  They are going to keep coming due to war, the effects of global warming, soil erosion and economic stress.

Currently European countries have many unemployed.  Why not put them to good work helping solve this problem.  But, where does the money come from?  Europe is not going so well at present and could do with some additional stimulus to get the Euro-wide economies doing more.  The solution is straight forward - create some new ‘money’ (Quantative Easing QE) and spend it directly on people and goods from Europe to help the refugees – both physically for their immediate welfare and for their long term integration.  We could even use some of these new refugees to help with these processes where they have the skill set to help.

This stimulates the whole European economy and the real cost comes from effectively devaluing the Euro.  This inflationary effect would not be immediate, it would slowly pass into the currency over the next few years, by which time the Euro economies would be benefiting from the additional spending from the unemployed and from the input of the refugees.

In future, many European countries shall benefit from the influx of younger refugees. This will lower the average age of the overall population and reduce the issue associated with an aging population.

The alternative is to continue to do as little as possible – this will just store up these costly issues for the future and may even lead to confrontation with the possibility of European dissolution. (Then we are working towards the third world war?)

Quantative Easing

Why is QE better than creating more debt?  QE is effectively a tax on everybody – the more they have, the more they pay.  It does not create unsustainable debt repayments that bludgeon the economy for future decades and help just the rich (who have the money to rent out).  So why not keep printing money?  Clearly, with a relatively limited QE, the economy can absorb this additional money.  It does not necessarily create inflation or devaluation, (although the external world markets may well right down the value of the Euro improving exports and making imports more expensive). 

If QE is continued (cf - Germany in the 1930’s), it leads directly to spiraling inflation.  So it must be used carefully and only when the economy is under performing to help take up the slack.  Once the slack is gone, the only way to ‘spend more than we take in taxes’ is to borrow and increase debt for future generations – effectively a future tax. 

It seems to CST that to have an under performing economy continue for a long period is just daft.  What is the point?  All major economies have huge ‘wealth & resources’.   When economies are under performing we can dip into that wealth and the resources to stimulate the economy.  This does of course reduce the population's current personal wealth so we need to make sure we get value for this loss.

Now, if this QE is done with some thought, we can stimulate the economy in such a way as to provide future returns for this addition input.  Exactly which way depends upon the current issues and what we think we may need in future.  Finding a solution to long term refugees and investing in energy production are two clear future needs.

What we do not need (as is usually done with QE) is just to plonk the money back into the economy without any thought. Britain gave £375Bn back to the bankers and pension funds without ANY thought about investment strategies or ring fencing the cash for future use. The result? - Just created a mini boom in the stock market, and of course this meant people thought they were richer (they were not) and so they spent more on iphones and other rubbish that has provide almost no future investment value for the UK. How stupid is that?

CST