Sunday, March 8, 2009

Is Quantitative Easing the answer?

Quantitative easing is not the answer

My character has been questioned just because I've had the audacity to argue QE will provoke serious inflation, making a bad situation much worse. No matter that I have several centuries of policy evidence on my side – to say nothing of the compelling logic of common sense. Printing money "is all about saving jobs" say my opponents. So if you're against QE, you're happy – even gleeful – to see decent people suffer the trauma of unemployment. That's how we've got into the current situation – where history shows QE is nuts and almost the entire country thinks QE is nuts, but no mainstream politician has the guts to oppose it. The stage has, instead, been left clear for Gordon Brown to vandalise the UK economy.

Posted by devo @ 09:40 PM (877 views)
Please complete the required fields.

4 thoughts on “Is Quantitative Easing the answer?

  • “We need to impose counter-cyclical reserve requirements, reverse Brown’s tripartite regulatory structure and re-impose the Glass-Steagall division between commercial and investment banking.

    Doing all this is tough – and means tackling entrenched vested interests. Cutting government spending, and rebalancing our public finances, will also take grit and determination”.

    Ok, my comment is that it ain’t gonna happen. Certainly in the life of this NuLAb cabinet.

    Please complete the required fields.

  • I suspect some of the more wiser members of the MPC know this is huge risk and could end in a even more bigger economic disaster than we currently face and the BOE have been forced into this action by the government. In the current scenario, we let the recession play out, as before in previous recessions (90s, 80s), by the end of it we will have an economy that is healthier, more productive and competitive and one that will perform much better in the long-term.

    On the other hand, based on the empirical evidence and economic history, the printing money is lilkely to wreck the economy for years to come. All past research shows increases in money supply just fuels inflation, any growth you get is temporary because it is not based on economic fundementals. You just end up with soaring inflation thereby rewarding the irresponsible (debitors), and punish those who have saved and lived according to what they could afford. Most worringly, money supply increases actually end up causing worse recessions and even more severe house and asset price falls a few years down the line as the central banks hikes rates to try to control rapidly increasing wages and inflation.

    But it seems this government wants to ignore the advancement of our understanding of macroeconomics and policy setting of the last 30 years. Have they not learnt anything? We have just regressed back decades. I fear as a result of this policy (all in the name of getting a few extra votes), our living standards will also regress back and we will also suffer an even worse fate as the people of this country did under previous labour governments of the 70s.

    Please complete the required fields.

  • Personally I think qe IS the answer.

    Providing the question is this:

    “How does the government transfer wealth from savers to borrowers in a way that isn’t illegally taking money out of their account and handing it to reckless borrowers?”

    Please complete the required fields.

  • Lucas: the banks create money, many times what government does by printing notes and coins or even by borrowing. That must be understood in order to understand QE. By limiting credit and foreclosing on existing loans, banks have been destroying money, restricting the money supply. QE is required to compensate for this destruction of the money supply.

    QE is little more than additional government borrowing, running an even larger deficit budget, but doing so simply to buy anything rather than invest in useful infrastructure and services. I’d rather we had something to show for it.

    Please complete the required fields.

Add a comment

  • Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
  • Please note that any viewpoints published here as comments are user´s views and not the views of
  • Please adhere to the Guidelines

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>