Monday, Oct 26, 2009
Ehh...! Could this be preparing for more QE next week.
Yahoo Finance: No evidence QE spurs inflation - Posen
There is no evidence from history that quantitative easing will result in high or persistent price pressures, Bank of England policymaker Adam Posen said on Monday. In his first public speech in Britain since becoming a member of the Bank's monetary policy committee in September, Posen struck a dovish tone and said problems in the banking system could weigh on economic activity for some time. "There is no evidence from relevant periods of UK or other major economies' economic history that QE will result in high or sustained inflation," Posen said. "Thus, high inflation is not something we should be worrying about."
Posted by wanderinman @ 07:05 PM (1398 views) Add Comment
26 Comments
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1. chrisa said...
'If monetary stimulus were withdrawn too soon, the result could be a double-dip recession, he argued'
This should be translated as: If we stop QE we will not be able to buy our own debt and we will not be able to fund the fake recovery or our fake government. On that we can agree i think.
What a slimy git though.
2. paul said...
"There is no evidence from relevant periods of UK or other major economies' economic history that QE will result in high or sustained inflation,"
That is simply a bare-faced lie. QE has never been deemed necessary, or even tried in the Bank of England's 350 year history.
3. chrisa said...
"When there are persistent financial sector problems, there are persistent negative effects on aggregate supply and on the potential rate of growth for an economy going forward, EVEN AFTER THE RECESSION ENDS" Posen said.
Just a little indication that even when GDP is inflated away to show a positive QE IS NOT GOING TO END.
4. chrisa said...
'There is no evidence from relevant periods of UK or other major economies' economic history that QE will result in high or sustained inflation," Posen said'
Of course, they don't regard Zimbabwe as a major economy do they!
5. letthemfall said...
No evidence that fifties thrown from the top of the BoE results in inflation either.
6. fallingbuzzard said...
I think he's dead right but I still don't like him.
7. paul said...
@fallingbuzzard
I've noticed that your views are somewhat counterlogical, especially when it comes to the Bank of England, their strategies on housing and QE. However every time I've challenged your views you've never answered.
So I'd really like you to support your assertion with something - anything. Even something irrational like "because i can feel it in my waters" would be fine. Please, share your wisdom. Why might printing money and showering it on bankers not be inflationary?
P.S. If you choose not to answer this time too, I'll assert that you're full of it.
8. paul said...
I wonder if Mervyn King sees inflation resulting from QE?
9. fallingbuzzard said...
@paul, deflation + inflation = no inflation. reflating an economy is extremely difficult when it deflates in isolation. thats why merv looks up, he knows it can't be done through qe.
10. This comment has been removed as it was found to be in breach of our Blog Policies.
11. Fla56 said...
to be frank ladies&gents, surely this depends on definition/measure of inflation?
to me, printing money=increase money supply=inflationary
in a country in which assests are massively used as a surrogate for real savings, house prices are being artifically maintained when a correction would otherwise happen -the 200%+ inflation of the last few years conviently never made it into the stats
quantative easing is theft
12. crunchy said...
World and market turbulence verses some money hoarding and printing which one is better or are they in fact the same?
To me future inflation looks likes a loaded gun in a childs toy box.
Counterlogical for now.
13. paul said...
@fallingbuzzrd
Show me the deflation!
CPI has remained stubbornly above target. There is no deflation.
14. fallingbuzzard said...
@paul. Disposable and discretionary income are leading indicators. You need to forecast these forward to have any clue of where CPI or RPI could go. CPI and RPI are argubaly useless lagging indicators as far as prediction goes.
15. 51ck-6-51x said...
Paul - I do not agree. I have seen deflation in food prices lately ( especially butter, my last purchase was 250g for 90p compared to my previous purchase ~1 month ago @ £1.00 - that's pretty steep and there could be other factors. )
However the argument that QE produces inflation and there is deflation, and that these cancel out is pretty useless since we would need to quantify BOTH to work out the final effect.
Instead, ask yourself if any of the QE money is going to escape the small pool ( in terms of capital flow ) to and from banks and the BoE. Maybe a little from bonuses; but not much IMO... Hence the QE has not been (particularly ) inflationary.
Note that this is totally my opinion - I do not asset I am right here and I have not pulled in statistics to affirm the state either - but go ahead if you like ( and have the time! )
16. 51ck-6-51x said...
^^
"and there could be other factors"
should read,
"but there could be other factors""
17. mr g said...
Excuse me isn't QE basically printing money?
Now, whilst I don't pretend to be a financial genius, doesn't history (Weimar Germany for example) show that printing money invariably leads to inflation?
@15 "I have seen deflation in food prices lately ( especially butter, my last purchase was 250g for 90p compared to my previous purchase ~1 month ago @ £1.00 - that's pretty steep and there could be other factors. )"
Which supermarket is this?
18. mark wadsworth said...
Mr G, QE is NOT printing money. It's the govt swapping one form of money (gilts) or another form of money (balances with the BoE). There are transaction costs but in itself it is pretty harmless (and pretty pointless).
Reckless spending and borrowing and running up future liabilities (public sector pensions, PFI etc) IS printing money, that's what we need to worry about!!
19. waitingfor hpc said...
errr ....Zimbabwee? err ......Argentina? Germany 1930's? Am I the only guy who studied history./
20. crunchy said...
19. To me future inflation looks likes a loaded gun in a childs toy box.
21. Andrew said...
Mark Wadsworth, but isn't the only reason it is not printing money the fact that when the BoE buys the gilts it is done electronically? Whoever sells the gilts to the BoE ends up with real money that they can spend on bonuses etc (and presumably more money than they bought the gilts from the DMO for). When the BoE eventually sells the gilts for less than it paid for them it will realise a loss, and the magnitude of this loss seems to me to be equivalent to the amount of money that has effectively been printed.
22. mark wadsworth said...
@ Waiting for HPC, in Zim or Weimar, they were literally printing money, actual physical notes.
That is completely different to QE.
Further, you can only have hyper-inflation in a closed economy with currency controls, which may have been true of the UK in the1970s but it is no longer true now - the far better comparison is Japan, as a separate issue, Japan ran up huge government debts bailing out banks and building white elephants, but they did not have high inflation in the last ten years.
Running up future debts (like our govt is doing) is also printing money in a sense. QE is not. It is a red herring.
23. letthemfall said...
Neither QE nor future pension liabilities, etc is printing money. QE is the Bank increasing the money supply in a limited sense, the upshot of which, so far, is to hold up the price of gilts and for the banks to keep their heads above water (and, it seems, pretend they're making a fortune through their expertise and efforts). This does not mean the money in general circulation has gone up. Problems with future pension liabilities are about longer lifespans - ie the costs have gone up. But nothing to do with QE.
Zimbabwe, Germany are different cases. The first has wrecked its own economy. Germany suffered punitive war reparations as well as the cost of a long war. Shovelling money into the economy stemmed from these problems. QE stems from the banks fouling up.
24. mr g said...
MW@18 "QE is NOT printing money. It's the govt swapping one form of money (gilts) or another form of money (balances with the BoE). There are transaction costs but in itself it is pretty harmless (and pretty pointless).
I understand your explanation in the first sentence but, if QE is harmless and pointless, why do so many people make such a big deal out of it?
I'm obviously missing something here.
25. crunchy said...
23. mr g said..."I'm obviously missing something here."
Keep it that way!
26. 51ck-6-51x said...
Mr G,
- oops. Sainsbury's & I think it was Country Life butter.