Thursday, March 5, 2009
Excellent explanation for why depression will stick with us
The Guardian's political commentators are living in cloud-cuckoo-land but their economic pieces are much better, particularly when certain bloggers pipe up: GolemXIV is always good, as is ChrisWoods here. It's easy to sum up why present policies will fail and why house prices will continue to fall (dramatically). Quantitative easing merely causes insolvent banks to hoard new money - they will NOT lend it out. There will be no effective increase in the money supply. HOWEVER, the bond and forex markets will, at some point, take fright at the possibility of inflation and at the fact UK plc is a busted flush. Inability to fund the public sector in the gilt auctions will require massive interest rate rises to sell the bonds. Hello Japanese-style depression.