Saturday, March 7, 2009
Ex-lax for the economy.
Barring a last minute attack of caution, it looks like the Bank of England will move today out of the realm of interest rate cutting and into a strategy known as Quantitative Easing. Having spectactularly failed to predict the credit crunch, I can at least claim to have predicted this, for in early October I said on Newsnight: "If the bank bailout does not work the only thing left is to cut taxes and print money". And so it has come to pass (though more on taxes below). The essential point about QE is that the bank invents new money and uses it to flood the banking system with cash: it's a bit like putting a power hose down a blocked drain. Eventually the water pressure moves the blockage.