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Bank Of England's Adam Posen Renews Calls For More Quantitative Easing

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Adam Posen, the Bank of England's leading "dove", has urged his colleagues on the monetary policy committee to urgently engage in a new round of quantitative easing to boost Britain's flagging economy.

Warning that Threadneedle Street and the central banks from the other G7 countries might have already waited too long to act, Posen said the UK's above-target inflation rate should not be a barrier to immediate action.

"Make no mistake, the right thing to do right now is for the Bank of England and the other G7 central banks to engage in further monetary stimulus," Posen said in a speech in Gloucester. "If anything, it is past time for us to do so."

The American economist said the outlook had turned out to be just as grim as historical precedent had suggested – based on the nature of the recession, attempts to cut budget deficits and the fact that all western economies were facing the same sort of problems.

"Sustained high inflation is not a threat in such an environment, and in fact the inflation that we have suffered due to temporary factors in the UK is about to peak." Official figures released on Tuesday showed that the annual rate of inflation as measured by the consumer prices index rose from 4.4% to 4.5% in August, equalling its highest level in almost three years.

More printy printy, all we all need is more free money. Although so far the only people who do get free money is the productive banking sector who then hand out large bonuses.

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"Make no mistake, the right thing to do"

I don't believe anyone that claims it's "the right thing to do". It's just a circular argument to get what they want, the sort of thing I would tell my kids when I cant think of anything better to justify them cleaning their room.

"Sustained high inflation is not a threat in such an environment"

True for wage inflation. False for price inflation.

One more step along the path to geographical equalisation of living standards.

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More printy printy, all we all need is more free money. Although so far the only people who do get free money is the productive banking sector who then hand out large bonuses.

But more importantly ... it worked so well last time didn't it ;)

Seriously, why will it work this time? Does pumping more and more water into a leaky tank fix the leaky tank, or perhaps it makes the holes bigger as they are under more pressure.

Just a thought.

Edited by Redcellar
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"Make no mistake, the right thing to do"

Personally, I think Posen should be fired for remarks like that. The man in the street might assume that he's asserting that this is his judgement in the context of the position of responsibility he holds - which it, blatantly, is not.

I hate the sort of person who blindly states that something is the "right thing to do" - it smacks of an utter lack of respect. In order for the words to have any meaning, we need to know 'right' in the context of what moral and ethical framework. Without such a context, the statement is vacuous propaganda - and is not the behaviour of any decent person.

All this is in spite of the fact that, actually, I wouldn't object to a further round of quantitative easing - assuming similar terms to last time... as, essentially, from my perspective, all this does is concentrate the worst assets on bank balance sheets. Assuming that assets are honestly valued (and I recognise that's a big "assuming") QE does not 'print' new money as such - it just transforms a high-yielding stable asset into cash - which, in turn, can go to pay down existing private debt. The risk with QE is that the assets won't be valued appropriately... and that's the big issue - as that would be printing money and would transfer private risk to public liability.

I'm broadly in favour of QE precisely because it "didn't work" - and more of something that doesn't work in the same way might help push things in the right direction. As far as I'm concerned, the problem today is with heel-dragging, not with direction, per se.

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  • 439 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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