Gavyn Davies Again Urges The Government To Print Money

[cht]

Some Quotes From the Article.

Gordon Brown, meanwhile, is arguing very directly for fiscal activism, implying that he favours either tax cuts or public spending increases in the immediate future, financed by extra borrowing, to combat recession. On this, he appears to be in agreement with the incoming Obama administration, which is discussing a fiscal package worth more than $500 billion, or 3% of GDP, despite the fact that America's public finances are in worse shape than Britain's.

Translated into British terms, an Obama-style fiscal injection would require the chancellor to increase public spending or cut taxes by £45bn on Monday. That is £45bn a year, not £45bn spread over several years, which is the unhelpful manner in which the Treasury has expressed its policy changes in recent times. The prime minister's aides were apparently told by the Obama team in Washington last weekend that the Americans intend, after the inauguration, to fight a war on recession. They added that, as in a real war, they would apply General Colin Powell's famous dictum: "use overwhelming force".

Furthermore, it seems that they have the support of the Federal Reserve on this. Vice chairman Donald Kohn, who is often the annointed representative on earth for chairman Bernanke, said last week that the risk of deflation is now growing. He pointed out that the Fed has already started to print money to combat this threat, and suggested that it would do much more of this if necessary. Remember that we are listening here to the US Federal Reserve, one of the most admired institutions in the world, not the central bank of an emerging economy. And they are getting strong support for these unorthodox measures from many of the driest of free market economists in the US.

If the UK faces the certainty of recession and a growing fear of deflation then, as in America, the use of overwhelming force is the surest way of addressing this. Those who fear eventual inflation or a run on the pound have legitimate medium term concerns, but the Americans have decided across the political spectrum that they need urgently to fight depression, and that other problems can wait. The pre-budget report will tell us whether the British government agrees.

[jp1]

This is the second time in a week that Davies, one of Gordons inner circle, and married to Brown's 'gatekeeper' Sue Nye has advocated the printing money route

No10 are definitely 'flying kites' on this issue, to see the markets and commentariat's reaction. This time round he's using Bernanke as cover

[cht]

This is the second time in a week that Davies, one of Gordons inner circle, and married to Brown's 'gatekeeper' Sue Nye has advocated the printing money route

No10 are definitely 'flying kites' on this issue, to see the markets and commentariat's reaction. This time round he's using Bernanke as cover

Agreed. Also Will Hutton has been saying the same for a couple of weeks. Suspect this was the real topic of conversation at the G20 junket and the reason everyone seemed so pissed at the Germans. Germany, understandably has an aversion to lax monetary policy.

[AvidFan]

I really do wish people would pay attention. Money printing, as strictly defined, are loans made by ones own central bank. I ASSUME they will try to fund spending through issuing government debt - which is still 1.5x over-subscribed and which is seeing renewed popularity - see the gilt story posted in the forum just recently. A 4.5% sterling yield isn't too shabby it seems...

Edited November 21, 2008 by AvidFan

[uncle rogi]

I really do wish people would pay attention. Money printing, as strictly defined, are loans made by ones own central bank. I ASSUME they will try to fund spending through issuing government debt - which is still 1.5x over-subscribed and which is seeing renewed popularity - see the gilt story posted in the forum just recently. A 4.5% sterling yield isn't too shabby it seems...

i guess we will find out soon enough, however 4.5% of something that could devalue more before i get my 4.5% is a bad investment surely.....and they have been talking about direct monitisation by the way i.e. * just printing £50 notes etc...at least that was in the last article i read by this prat..*(his words not mine) this could all end up in an icelandic style admittance that sterings recent value is a function of our ponzi economy in operation, now that the ponzi has finally collapsed/been revealed and the likely long term effects calculated...guess what.......

[the_austrian]

I really do wish people would pay attention. Money printing, as strictly defined, are loans made by ones own central bank. I ASSUME they will try to fund spending through issuing government debt - which is still 1.5x over-subscribed and which is seeing renewed popularity - see the gilt story posted in the forum just recently. A 4.5% sterling yield isn't too shabby it seems...

Gavyn Davies writing in the Guardian: (We must start thinking like South American dictators)

An economy on the brink of deflation needs to jettison the orthodoxies of prudence - in favour of a licence to print money

This is where governments might need to be even more unorthodox. The tax cuts do not have to be financed by selling bonds. They can be financed by asking the Bank of England to offer an overdraft to the government, which is a polite way of saying by printing money. If you think about this as a process in which the central bank prints bank notes (essentially at zero cost) and gives them to the government to hand out in tax reductions, you would not be wrong in any meaningful way. This is a crazy and dangerous procedure when inflation is threatened - but it is the most powerful way of fighting deflation that economists have invented. Perhaps it will become necessary.

[uncle rogi]

the central bank prints bank notes (essentially at zero cost) and gives them to the government to hand out in tax reductions, you would not be wrong in any meaningful way. .[/i][/size]

this is the bit i was thinking of, i was not wrong LOL... insanity.

[BXLONDONMAN]

This is the second time in a week that Davies, one of Gordons inner circle, and married to Brown's 'gatekeeper' Sue Nye has advocated the printing money route

No10 are definitely 'flying kites' on this issue, to see the markets and commentariat's reaction. This time round he's using Bernanke as cover

they will have to print money no choice or masses out of work,,,we will be brainwashed into thinking printing money is good for us :angry:

[Sinking Feeling]

So we don't have to worry about the inflationary effects of printing money if we have deflation then.

"In 1920, prices plummeted around the world in a great deflation. This price and wage deflation was reinforced by the economic policies of conservative governments. Germany's new Weimar Republic inherited the vast burden of debt and the crushing weight of reparations............by late 1923, the German government required 1,783 printing presses, running around the clock, to print money. Germans wheeled shopping carts filled with literally trillions of marks to pay for a single loaf of bread. Employees asked to be paid their wages each morning so that they could shop at noon before merchants posted the afternoon price rises."

[uncle rogi]

they will have to print money no choice or masses out of work,,,we will be brainwashed into thinking printing money is good for us :angry:

hence the spoon feeding of anti deflation propaganda on mainstream news recently.

allowing the boom to bust is the only real way to get healthy growth back into the economy however that would result in a severe slump i.e. 10 years of hell on wheels.....

zanulabour indeed.

[cht]

Gavyn Davies writing in the Guardian: (We must start thinking like South American dictators)

An economy on the brink of deflation needs to jettison the orthodoxies of prudence - in favour of a licence to print money

This is where governments might need to be even more unorthodox. The tax cuts do not have to be financed by selling bonds. They can be financed by asking the Bank of England to offer an overdraft to the government, which is a polite way of saying by printing money. If you think about this as a process in which the central bank prints bank notes (essentially at zero cost) and gives them to the government to hand out in tax reductions, you would not be wrong in any meaningful way. This is a crazy and dangerous procedure when inflation is threatened - but it is the most powerful way of fighting deflation that economists have invented. Perhaps it will become necessary.

Cheers for digging that up. When someone that close to Gordon makes such an explicit statement, you can assume it's on the government drawing board.

[punter]

the Fed one of the most 'admired' institutions in the world? hahaa

yeah ok, print more money, it wont make a difference and devaluing the pound further would be catastrophic, this will mean Zimbabwe style inflation in consumer goods.

Obama and the yanks are not economic geniuses, they have had their own stimulas and bailouts and its made bugger all difference like here. copying them would be a grave error

[VacantPossession]

I'm sub-consciously making a list of those sycophants to Gordon Brown who, if he survives for another couple of years, will magically be awarded peerages or other gongs on account of their "service" to journalism, Parliamentary Select Committees or civil service departments.

BTW, Mandelson's appointment to office without a public mandate (ie: not having been voted for) is a habit which, despite being prevalent in this government, is strictly speaking unconstitutional. But what the hell, that is fussy detail which is apparently very old fashioned and therefore irrelevant.

VP

[eric pebble]

Gavyn Davies -- or Gav - is a prize prat. A typical Nieu Labia Apparatchik beardy git [who can't shave properly]. He spends much time in the back garden at No: 10 doing a bit of uphill gardening with that one-eyed botty burglar, Gordon Broon. They have, between themselves and that other 'lifter Mendasciouson - totally destroyed the UK economy with their bent "economics".....

Edited November 21, 2008 by eric pebble

[anon]

"Gavyn Davies writing in the Guardian: (We must start thinking like South American dictators)"

i assure you Mr davies, comrade Brown has been thinking like a south american dictator for years.

[Authoritarian]

According to Alice Cook from the UK bubble blogspot the the BofE cannot simply print as much money as it likes due to British membership of the EMU. Gilts it is then.

http://ukhousebubble.blogspot.com/

Edited November 21, 2008 by chefdave

[South Lorne]

"Gavyn Davies writing in the Guardian: (We must start thinking like South American dictators)"

i assure you Mr davies, comrade Brown has been thinking like a south american dictator for years.

....yeah...and Gordo's theme song 'Don't Cry For Me United Kingdom'......you bet.....

[Converted Lurker]

I really do wish people would pay attention.

Quite, do keep up.

[Sinking Feeling]

According to Alice Cook from the UK bubble blogspot the the BofE cannot simply print as much money as it likes due to British membership of the EMU. Gilts it is then.

http://ukhousebubble.blogspot.com/

As far as I'm aware there's a clause in the Maastricht Treaty prohibiting it.

[lufc]

As far as I'm aware there's a clause in the Maastricht Treaty prohibiting it.

For the time being ... McStalin the saviour of the financial universe will no doubt have that rule top of his list to be rescinded ... *****.

Poor wording - ***** (Pr1ck) was directed at McStalin, not you Sinking.

Edited November 21, 2008 by lufc

[Allthatglitters]

For the time being ... McStalin the saviour of the financial universe will no doubt have that rule top of his list to be rescinded ... *****.

How can you mock him so? Adam Smith and him were born in the same town.

:angry:

[ZeroSumGame]

How can you mock him so? Adam Smith and him were born in the same town.

:angry:

One was the founder of Political Economy and registered for a degree at the age of 14 , Ph.D at the age of 18 and the other.........................

well enough has already been added in forums unbounded.

apart from that pure geograhical coincidence.

[ZeroSumGame]

Gavyn.Gavyn,Gavyn matey - you used to be so inciteful 15,20 years ago. Now you're nowt but a ZanuLab aparatchik bore.

Please sell one of your many houses and send the proceeds to feed the starving of Africa. That's about the maximum you could now contribute to anything.

[injustice]

According to Alice Cook from the UK bubble blogspot the the BofE cannot simply print as much money as it likes due to British membership of the EMU. Gilts it is then.

http://ukhousebubble.blogspot.com/

I could be wrong here, but I think we withdrew from EMU when Mr Soros decided to make a few quid back in 1992.