Thursday, October 6, 2011
Bailing out homeowners again
Already, the Bank of England has bought up around 20pc of the national debt, equal to some 14pc of GDP. This latest round of QE will expand it to close to 30pc. I worry both that it will be ineffective in terms of stimulating investment and growth, and that we are now perilously close to outright monetisation of the deficit (a policy approach which all economic history shows ends in abject disaster). I worry that ultimately it's bound to be inflationary. As it is, I fear that it will again be the investment bankers who are the major beneficiaries. QE is like a drug; once hooked, it's very difficult to wean yourself off. Just how many fixes are required before you realise you are an addict?