Saturday, October 9, 2010

Osborne to support BoE on further QE

Chancellor backs Bank of England action

George Osborne has given the green light to the Bank of England to pump more money into the economy ... Ministers hope the first line of defence against a second recession will be higher private investment and exports ... If this does not work, however, the chancellor wants to open the way for the central bank to maintain demand with more quantitative easing. Asked whether he would back a second round of quantitative easing, known as QE2, he said he would want to follow the practice of Alistair Darling, the former chancellor who always gave a green light for the MPC to act. “If the MPC ask – I have said I regard the MPC as independent – if it makes a judgment, I would want to follow that judgment and continue with the procedures of my predecessor in dealing with those requests.”

Posted by wanderinman @ 04:56 PM (2288 views)
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17 thoughts on “Osborne to support BoE on further QE

  • Disgusting. And to think Mr Osbourne said, and I quote “the next conservative government will not inflate away the debt” before the election. UTTERLY DISGUSTING.

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  • mark wadsworth says:

    Christ on a crutch.

    QE is NOT ‘pumping money into the economy’ (the easiest and quickest way to do that would simply be to cut taxes*) it is a massive paper shuffling exercise between two departments in HM Treasury (Bank of England and Debt Management Office) and the commercial banks.

    * Tax cuts can be ‘progressive’ (reduce VAT, Employer’s NIC, increase personal allowance for income tax/NIC) or ‘regressive’ (cut VAT, higher rate tax, capital gains tax). I’d prefer a bit of both. Or even more fundamentally, tax can be made more business friendly (without reducing the total tax take) by shifting from taxes on incomes and output to taxes on consumption of LAND (and other state protected monopolies).

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  • Hpc Follower says:

    Mark W – When Labour did this many months later house prices started to rebound upwards. If BOE start QE2, do you think that the same will happen this time?

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  • MW said….by shifting from taxes on incomes and output to taxes on consumption of LAND ….

    Mmm, interesting thesis – how could we achieve this in practicle terms, Mark?

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  • mark wadsworth says:

    BD, I apologise if I’ve never explained that before

    a) you decide which taxes you are going to scrap/reduce (we all have own views on which). This gives you an absolute figure in £ billions which you have to raise in land value tax. As we well know, there are ‘regressive’ and ‘progressive’ taxes, so we can do this to benefit lower earners, higher earners, whatever floats your boat.

    b) You do some rough and ready valuation of RELATIVE land values in each smaller area (e.g. postcode sector, about 2,000 addresses) using data already held electronically by HM Land Reg on sales over last five or ten years.

    c) You apportion your answer from (a) between all land values, whereby it is only RELATIVE values that matter to arrive at a tax/sq yard for all developed land, whether residential or commercial.

    d) You make it clear from outset that pensioners will get exemptions, discounts, interest free deferment and/or additional basic state pension to get round that sticking point.

    e) Even on a static basis, there will be more winners than losers. The tax will be neither regressive nor progressive – the highest earners on any street will pay less than now and the lowest earners will pay more. Conversely, people in the most desirable areas (who tend to be higher earners) will pay more than people in crummy areas.

    RELATIVE = it is impossible to say what the capital or rental value of any site is to within less than 10% or 15% margin of error, there are all sorts of assumptions involved. But it is quite easy to adopt some rough and ready calculation, so e.g. there is no point trying to ‘prove’ that a residential plot in Blackburn has an exact rental value of £9,624.30 per annum and that in Leeds is £20,248.60.

    What is important is that the fomer is half the latter, and Leeds in turn is half of nice boroughs in Outer London, and so on.

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  • Rearranging the deck chairs on the Titanic. Changing the money supply does nothing in the medium to long term to the real economy. It is just a short term wheeze. Longer term, rates go in nominal terms and the problem has just been strung out for longer. Meanwhile, the notion that the 100s of thousands of public sector workers who are going to be getting their P45s in 90-odd days time will be absorbed by the private sector just demonstrates how out of touch our politicians are. The private sector can’t absorb people who are willing to work for next to nothing, let along prima donnas who have been weened to expect a 37.5 hour week and a gold-plated pension. I can’t help but feel that the print money, sell it cheap wheeze is reaching the end of its shelflife. What was it I read, that the biggest holder of US Treasuries is now the Fed? How does that work? I borrow money and then buy the money back with money I don’t have? The world’s gone mad with wheezes that were invented in the financial sector, criticised by politicians and now embraced by them. I really don’t know what to think any more.

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  • Why has no-one ever thought of this before?

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  • One begins to worry that the government is unable to pay it’s debts. This is a serious concern and surely the flight from the UK is going to accelerate if another round of QE starts. Generally I would like to know exactly how the previous 200bn of QE helped me before they start another round. Where did this money go and who decided where it went. All I see right now is an illogical increase in the FTSE and house prices which ties in nicely with the period of QE. This is sickening for those who don’t gamble or invest.

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  • @6 titaniccaptain

    That was a f*cking good laugh thanks.

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  • It does say prank complaint though, I missed that, I thought was genuine, still made me laugh.

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  • 1. mark wadsworth said…Christ on a crutch.

    QE is NOT ‘pumping money into the economy’ (the easiest and quickest way to do that would simply be to cut taxes*) it is a massive paper shuffling exercise between two departments in HM Treasury (Bank of England and Debt Management Office) and the commercial banks.

    Of course Mark, of course. lol Wake up and smell the ink mate.

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  • @Titaniccaptain

    I first saw bits of that film in the late 1980’s and boy did it f*ck my head up. That along with various other things. Sh!t I wish
    I hadn’t posted that video, but I believe it is a masterpiece.

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  • COME and SEE!

    The reality would have been far worse that what’s shoen in the film. There would have been the movement within the fire & building of people being burned alive, trying to get out falling around etc

    All to do with crowd and crowd behaviour.

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  • Oh, Tc, that was brilliant.

    Definitely your voice though 😉

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  • What is now interesting is that Brown was universally vilified for QE, letting the exchange rate drop, etc, by many on this blog. I am no supporter of Brown, but at the time, I didn’t think he had any other choice and at least he was more decisive than some of the other politians in Europe. If Osborne is now going to start the printing presses and western economies are going the deflation route, then it blows this debate wide open. Was Brown strategy from 2008 onwards actually forward thinking?

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  • Oh dear, more fraud, or whatever you want to call this mischief. This is just the BoE (a subsidiary of the government) buying more of the governments debt, because they can’t pay it off fast enough; this doesn’t help anyone except the parasites in government and bond investors (suckers). Just how long can this last?

    Got Ag and Au to protect you from faster sterling devaluation?

    If the government were serious about slashing costs, they’d stop pussy footing around the NHS, find some way to slash the useless red tape on the NHS, sack all but essential NHS management, squeeze the astonishing pay of GPs down to sensible levels, even sack GPs on-the-make and put deadly hospitals under competent oversight. This should not boost unemployment much, but could save many Billions!

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  • TC @6

    Would you believe, I had the same issue with a whole box of jaffacakes!
    No chocolate coating on any of them!!

    And don’t get me started on the jelly babies fiasco!

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