What he wanted us all to understand was that Jeremy Corbyn's plan to print money to spend on building houses was going to be a disaster which led to inflation. The truth is that it all depends on circumstances.
If a government prints money in the middle of an economic expansion and lets the cycle get out of control then that really is a pretty stupid thing to do. It could well fuel a bubble in asset prices and lead to a wild boom followed by a dreadful bust. Jack Straw should know this as he was part of the Gordon Brown government that made this mistake. Labour lost the last election because in power they had told us that they had put an end to the cycle of boom and bust. Only one part of that statement proved true. Letting the banks' wild off balance sheet lending boom get out of control resulted in the most dangerous bust since the war. At the last election the Conservatives found it easy to blame 7 years of cuts and misery on this very real error of judgement. The electorate forgot that almost every other Western government made the same mistake and that it was Margaret Thatcher's removal of proper government control over the banking system that made it possible. They remembered that Labour got it wrong and that is why the Conservatives scraped home with just enough people accepting their implausible assurances that were fixing other people's mistakes.
On the other hand if you print money during a downturn to ease it or to prevent a depression then that can be very sensible economics if it is done wisely. It was done by Roosevelt during the New Deal and it worked a whole lot better than the austerity politics which gave us the Great Depression and the rise of Hitler. Since 2008 it has been done by the Bank of England to the tune of £375billion and the Fed has printed another $3,000 billion. This quantitative easing has been hugely helpful. I don't like bailing out banks but it is a whole lot better than not bailing them out. Discovering that your life savings have just gone in a bank collapse or that your company has just made you redundant because the bank has refused it all credit is not a pleasant experience. When banks start to collapse ordinary people get very badly hurt.
What the Bank of England did to save us from disaster was to buy assets from the banks that they owned but were not able to sell because after the crash everyone was in a panic and wanted to get their hands on cash quickly. Some of those assets were long term investments in private companies. Most of them were long term investments in .... wait for it .... the UK government's own bonds. The money that the Bank of England used to do this wasn't taken from taxes or spending cuts - they simply printed it electronically. And one result is that they - and since we own it we - now own around a third of the national debt. And could cancel it any time we chose.
Because the Bank of England printed money at a time when people and firms were suffering and cutting back in their spending it didn't create inflation. That now stands at zero per cent despite the biggest money printing exercise in our history. Nor did it lead to increases in interest rates. They also stand at historic lows.
So we have recent proof that you can print enormous quantities of money and do good not harm. The question can therefore reasonably be asked: "if we can print money to save the banks why can't we print money to do something more positive?"
The answer is that it depends on what that more positive thing is, what point you are at in an economic cycle and whether it is spent abroad or at home. You can't, for example, simply plug the gap in the country's finances forever by printing money. The Conservatives really are right that sooner or later you have to balance government income and expenditure. They are, of course, completely wrong that it is morally necessary for government to pass a law forcing itself to always and everywhere spend less than it earns. That would have guaranteed a complete collapse in 2008 and is desperately clumsy economics. Nevertheless constant printing of money to cover revenue costs regardless of the state of the economic cycle eventually results in a loss of confidence in your currency. So does printing money which is then simply spent on buying imports.
But printing money when the economy is slowing and using that money for wise investments is perfectly OK. What makes money valuable is the goods and services it can be exchanged for. If you can direct newly printed money into increasing the capacity of your economy to produce goods and services that people need then there is no problem. The newly printed money gets spent on the newly produced goods and there is no inflation.
It is worth contrasting this investment led strategy with the current QE. Print money and put it into the banking system and it is possible that the banks will lend that money out constructively to companies that are seeking to invest. It is also possible it might go into a stock market boom, an increase in house prices and leave you with low productivity and a huge balance of payments deficit. It very much looks as if this is exactly what has been happening in the UK.
Now that we have rescued the banks from disaster any more QE for them really might be inflationary and damaging. But QE that is spent on wise investment in the future does make sense. I have been advocating it for a major investment in cutting energy consumption. This reduces costs for UK industry and helps make them more competitive and so boosts jobs. It reduces import bills on fuel and helps the balance of payments. It places the country at the forefront of the next industrial revolution and gives us a chance of competing much more effectively in a global low energy economy. It is a deeply responsible approach that genuinely represents a long term economic plan. You can make much the same case for investment in efficient local railway systems to cut petrol consumption and increase productivity. Investment in building more social houses may also work as it is not only good for people but cuts running costs for government via reduced housing benefits.
So if Jeremy Corbyn is proposing investment led growth in a transformation to a Green economy then he is actually being incredibly economically responsible. I have my doubts that he understands the difference between the necessity for responsible green investment and reckless over expenditure on revenue but one thing is clear. His economic proposals sound a lot more promising that the advice we are getting from one of the key members of one of the most economically reckless governments we have ever had. Even more strange is that Jack Straw's advice is to go for a policy that amounts to austerity light. Having proved himself a bad economist he then proceeds to demonstrate that he is even worse at politics. This was the policy of the Lib Dems at the last election. In case you have forgotten in the face of constant repetition of an error, the Labour vote held steady. It was the utter collapse of the Lib Dem vote that produced a Conservative government!