Monday, Oct 26, 2009

Ehh...! Could this be preparing for more QE next week.

Yahoo Finance: No evidence QE spurs inflation - Posen

There is no evidence from history that quantitative easing will result in high or persistent price pressures, Bank of England policymaker Adam Posen said on Monday. In his first public speech in Britain since becoming a member of the Bank's monetary policy committee in September, Posen struck a dovish tone and said problems in the banking system could weigh on economic activity for some time. "There is no evidence from relevant periods of UK or other major economies' economic history that QE will result in high or sustained inflation," Posen said. "Thus, high inflation is not something we should be worrying about."

Posted by wanderinman @ 07:05 PM (1833 views)
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27 Comments

1. chrisa said...

'If monetary stimulus were withdrawn too soon, the result could be a double-dip recession, he argued'

This should be translated as: If we stop QE we will not be able to buy our own debt and we will not be able to fund the fake recovery or our fake government. On that we can agree i think.

What a slimy git though.

Monday, October 26, 2009 07:42PM Report Comment
 

2. paul said...

"There is no evidence from relevant periods of UK or other major economies' economic history that QE will result in high or sustained inflation,"

That is simply a bare-faced lie. QE has never been deemed necessary, or even tried in the Bank of England's 350 year history.

Monday, October 26, 2009 07:48PM Report Comment
 

3. chrisa said...

"When there are persistent financial sector problems, there are persistent negative effects on aggregate supply and on the potential rate of growth for an economy going forward, EVEN AFTER THE RECESSION ENDS" Posen said.

Just a little indication that even when GDP is inflated away to show a positive QE IS NOT GOING TO END.

Monday, October 26, 2009 07:54PM Report Comment
 

4. chrisa said...

'There is no evidence from relevant periods of UK or other major economies' economic history that QE will result in high or sustained inflation," Posen said'

Of course, they don't regard Zimbabwe as a major economy do they!

Monday, October 26, 2009 07:56PM Report Comment
 

5. letthemfall said...

No evidence that fifties thrown from the top of the BoE results in inflation either.

Monday, October 26, 2009 08:23PM Report Comment
 

6. fallingbuzzard said...

I think he's dead right but I still don't like him.

Monday, October 26, 2009 08:45PM Report Comment
 

7. paul said...

@fallingbuzzard

I've noticed that your views are somewhat counterlogical, especially when it comes to the Bank of England, their strategies on housing and QE. However every time I've challenged your views you've never answered.

So I'd really like you to support your assertion with something - anything. Even something irrational like "because i can feel it in my waters" would be fine. Please, share your wisdom. Why might printing money and showering it on bankers not be inflationary?

P.S. If you choose not to answer this time too, I'll assert that you're full of it.

Monday, October 26, 2009 11:02PM Report Comment
 

8. paul said...

I wonder if Mervyn King sees inflation resulting from QE?

Monday, October 26, 2009 11:04PM Report Comment
 

9. fallingbuzzard said...

@paul, deflation + inflation = no inflation. reflating an economy is extremely difficult when it deflates in isolation. thats why merv looks up, he knows it can't be done through qe.

Monday, October 26, 2009 11:38PM Report Comment
 

10. This comment has been removed as it was found to be in breach of our Blog Policies.

 

11. Fla56 said...

to be frank ladies&gents, surely this depends on definition/measure of inflation?

to me, printing money=increase money supply=inflationary

in a country in which assests are massively used as a surrogate for real savings, house prices are being artifically maintained when a correction would otherwise happen -the 200%+ inflation of the last few years conviently never made it into the stats

quantative easing is theft

Tuesday, October 27, 2009 12:21AM Report Comment
 

12. crunchy said...

World and market turbulence verses some money hoarding and printing which one is better or are they in fact the same?

To me future inflation looks likes a loaded gun in a childs toy box.

Counterlogical for now.

Tuesday, October 27, 2009 03:47AM Report Comment
 

13. paul said...

@fallingbuzzrd

Show me the deflation!

CPI has remained stubbornly above target. There is no deflation.

Tuesday, October 27, 2009 07:59AM Report Comment
 

14. fallingbuzzard said...

@paul. Disposable and discretionary income are leading indicators. You need to forecast these forward to have any clue of where CPI or RPI could go. CPI and RPI are argubaly useless lagging indicators as far as prediction goes.

Tuesday, October 27, 2009 11:10AM Report Comment
 

15. 51ck-6-51x said...

Paul - I do not agree. I have seen deflation in food prices lately ( especially butter, my last purchase was 250g for 90p compared to my previous purchase ~1 month ago @ £1.00 - that's pretty steep and there could be other factors. )

However the argument that QE produces inflation and there is deflation, and that these cancel out is pretty useless since we would need to quantify BOTH to work out the final effect.

Instead, ask yourself if any of the QE money is going to escape the small pool ( in terms of capital flow ) to and from banks and the BoE. Maybe a little from bonuses; but not much IMO... Hence the QE has not been (particularly ) inflationary.
Note that this is totally my opinion - I do not asset I am right here and I have not pulled in statistics to affirm the state either - but go ahead if you like ( and have the time! )

Tuesday, October 27, 2009 11:47AM Report Comment
 

16. 51ck-6-51x said...

^^
"and there could be other factors"
should read,
"but there could be other factors""

Tuesday, October 27, 2009 11:48AM Report Comment
 

17. mr g said...

Excuse me isn't QE basically printing money?

Now, whilst I don't pretend to be a financial genius, doesn't history (Weimar Germany for example) show that printing money invariably leads to inflation?

@15 "I have seen deflation in food prices lately ( especially butter, my last purchase was 250g for 90p compared to my previous purchase ~1 month ago @ £1.00 - that's pretty steep and there could be other factors. )"

Which supermarket is this?

Tuesday, October 27, 2009 01:07PM Report Comment
 

18. mark wadsworth said...

Mr G, QE is NOT printing money. It's the govt swapping one form of money (gilts) or another form of money (balances with the BoE). There are transaction costs but in itself it is pretty harmless (and pretty pointless).

Reckless spending and borrowing and running up future liabilities (public sector pensions, PFI etc) IS printing money, that's what we need to worry about!!

Tuesday, October 27, 2009 02:58PM Report Comment
 

19. waitingfor hpc said...

errr ....Zimbabwee? err ......Argentina? Germany 1930's? Am I the only guy who studied history./

Tuesday, October 27, 2009 03:26PM Report Comment
 

20. crunchy said...

19. To me future inflation looks likes a loaded gun in a childs toy box.

Tuesday, October 27, 2009 03:46PM Report Comment
 

21. Andrew said...

Mark Wadsworth, but isn't the only reason it is not printing money the fact that when the BoE buys the gilts it is done electronically? Whoever sells the gilts to the BoE ends up with real money that they can spend on bonuses etc (and presumably more money than they bought the gilts from the DMO for). When the BoE eventually sells the gilts for less than it paid for them it will realise a loss, and the magnitude of this loss seems to me to be equivalent to the amount of money that has effectively been printed.

Tuesday, October 27, 2009 04:02PM Report Comment
 

22. mark wadsworth said...

@ Waiting for HPC, in Zim or Weimar, they were literally printing money, actual physical notes.

That is completely different to QE.

Further, you can only have hyper-inflation in a closed economy with currency controls, which may have been true of the UK in the1970s but it is no longer true now - the far better comparison is Japan, as a separate issue, Japan ran up huge government debts bailing out banks and building white elephants, but they did not have high inflation in the last ten years.

Running up future debts (like our govt is doing) is also printing money in a sense. QE is not. It is a red herring.

Tuesday, October 27, 2009 04:36PM Report Comment
 

23. letthemfall said...

Neither QE nor future pension liabilities, etc is printing money. QE is the Bank increasing the money supply in a limited sense, the upshot of which, so far, is to hold up the price of gilts and for the banks to keep their heads above water (and, it seems, pretend they're making a fortune through their expertise and efforts). This does not mean the money in general circulation has gone up. Problems with future pension liabilities are about longer lifespans - ie the costs have gone up. But nothing to do with QE.

Zimbabwe, Germany are different cases. The first has wrecked its own economy. Germany suffered punitive war reparations as well as the cost of a long war. Shovelling money into the economy stemmed from these problems. QE stems from the banks fouling up.

Tuesday, October 27, 2009 04:40PM Report Comment
 

24. mr g said...

MW@18 "QE is NOT printing money. It's the govt swapping one form of money (gilts) or another form of money (balances with the BoE). There are transaction costs but in itself it is pretty harmless (and pretty pointless).

I understand your explanation in the first sentence but, if QE is harmless and pointless, why do so many people make such a big deal out of it?

I'm obviously missing something here.

Tuesday, October 27, 2009 07:00PM Report Comment
 

25. crunchy said...

23. mr g said..."I'm obviously missing something here."

Keep it that way!

Wednesday, October 28, 2009 01:56AM Report Comment
 

26. 51ck-6-51x said...

Mr G,
- oops. Sainsbury's & I think it was Country Life butter.

Wednesday, October 28, 2009 03:42PM Report Comment
 

27. This comment has been removed as it was found to be in breach of our Blog Policies.

 

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