Tuesday, Oct 27, 2009
Indefinite Printing
Bloomberg: Cameron Backs Away From Call to End Quantitative Easing ‘Soon’
David Cameron, leader of the U.K. Conservative Party, said his speech earlier this month warning that the Bank of England’s policy of quantitative easing would have to stop “sometime soon” had been over-interpreted.
His remarks were described at the time as “dangerous” and “bizarre” by former Bank of England policy maker David Blanchflower.
Posted by mander @ 06:30 PM (1214 views) Add Comment
16 Comments
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1. chrisa said...
It can't end. When TSHTF though hopefully the people will remember who were responsible when they are out rioting on the streets with the nooses prepared.
2. quiet guy said...
"It can't end."
Can anybody explain exactly why? The current rate of QE is unsustainable but if the government decided to just dip their toe into the bond market now and again, would the world end?
Our relationship with QE seems to be getting like an alchoholic's with hooch - 'I'll just have one more'
3. chrisa said...
When you are running a budget deficit of around 14% GDP and you can't get foreigners to buy your debt what is the solution? Answer: you just print up the money and buy it yourself. You take the value out of the currency in a process a bit like an animal eating itself, and shaft anyone holding cash, but hey just call it a nice name like QE and it doesn't sound so bad.
Cameron knows the situation.
Hyperinflationary Depression awaits.
4. chrisa said...
@2 "It can't end."
Can anybody explain exactly why? The current rate of QE is unsustainable.
Is it? The current rate of QE is virtually identical to the budget deficit. Since there are predicted to be similar deficits over the next 2/3 years it must continue to cover those years, at least, I would have thought. Since QE and spin is all that is behind the stock market and house price rally since march it won't end.
It therefore has 2 roles which are covering the budget deficit and propping up and reinflating asset prices. This it is succeeding in doing. This purpose of QE is now being openly admitted in these terms. Therefore how can it stop?
5. devo said...
Answer this:
Which central banks are currently involved in the process of QE, or quantitative easing?
6. Davepage said...
@chrisa 3. Exactly. I'm one of those people holding cash who is getting shafted at the moment. Unfortunately, and unlike many of the selling-to-rent crowd on this site, I earned that cash through hard labour and not as a result of property appreciation, so I am get truly fcked by the state.
For those sitting on cash 'earned' from STR, sitting on the sidelines with your bubble profits waiting for the HPC, QE is your just desserts. You didn't earn it so you shouldn't mind losing it.
With Cameron's backtracking, the only good news is that the Americans are as hard at QE as we are, so at least the £ is keeping some sort of parity with the $.
Having saved hard for years to get the money together for a home, the Govt. is driving house prices back up using my own money. If I could get a US visa, I'd cash out of sterling and this rotten little country tomorrow.
7. chrisa said...
5. devo said...
Answer this:
Which central banks are currently involved in the process of QE, or quantitative easing?
Probably all of them. If they all devalue at the same time through QE use their populations will find it harder to see their particular currency being trashed. Presumeably. Some are more criminally insane than the others though. Presumeably.
8. devo said...
Q:Which central banks are currently involved in the process of QE, or quantitative easing?
A:Probably all of them.
And how many central banks are there?
9. chrisa said...
7. devo said...
Q:Which central banks are currently involved in the process of QE, or quantitative easing?
A:Probably all of them.
And how many central banks are there?
No idea.
Question: Which countries DON'T have central banks.
10. devo said...
"And how many central banks are there? No idea."
My God! Do I have to do all the work?
11. alan said...
@ Devo (and anyone else),
India has today announced that they are winding up QE.
http://www.bloomberg.com/apps/news?pid=20601068&sid=a.Cc4PTq_Tgg
India's central bank explains why. The article also covers Norway, Australia and Korea.
12. devo said...
The Bank for International Settlements (BIS) is an international organization of central banks which "fosters international monetary and financial cooperation and serves as a bank for central banks."
It is not accountable to any national government.
13. eyeoftheweasel said...
Don't know that too many central banks are engaging in QE - as far as I'm aware it's only the central banks of the UK, US and Zimbabwe doing it at the moment, so we're in good company. Historically there's Japan a few years ago, then Weimar Republic Germany, which helped pave the way for Adolf Hitler's chancellorship.
I'm not normally a fan of David Cameron, but it strikes me that if Danny Blanchflower described his remarks as “dangerous” and “bizarre” then maybe he's onto a winner. Read something else recently that Danny Boy had said about reducing government spending during a recession being the wrong thing to do according to Keynes. That's true, but then Keynes also advocated cutting back on spending during a boom which Danny seemed to have conveniently left out of his statement.
Anyway, for the same reasons that while I think Keynes was right on fiscal policy, politically there's probably too much temptation to keep pumping the money in once the recession is over. I think the same applies to QE. If it's really going to be done properly then it needs to be withdrawn at the right time. However, once it's started who's going to have the guts to stop it? Since there's always another election just around the corner, that won't be anyone in this country. If interest rates had been maintained at appropriate levels during the 'boom' times (i.e. much higher than they were), then this QE nonsense wouldn't even need to be considered now. The fact that it is being used is just another sign of how badly the economy in this country has been run for the last 12 years.
14. eyeoftheweasel said...
Ah well, from the intervening comments of others, looks like my knowledge of how far the QE disease has spread was lacking.
15. devo said...
13. eyeoftheweasel said.. looks like my knowledge of how far the QE disease has spread was lacking.
Look at quantitative easing, or QE, not as the disease, but rather as the palliative medicine.
pal·li·a·tive, adj.
Relieving or soothing the symptoms of a disease or disorder without effecting a cure
adj.
16. goweresque said...
QE will continue until the next election. Then one of two things will happen. Either Dave and Co produce a credible plan to reduce the deficit over the lifetime of the next parliament (which will include ending QE), or they fudge the issue, in which case there will be a catastrophic run on the pound within months. Either way the medicine has to be taken, voluntarily, or forced down our throats by the bond markets. The former is preferable to the latter, but not by much.