Thursday, July 19, 2012
A case for credit force feeding
Regarding the problems with more QE, Hirst notes: "If, however, the MPC is still labouring under the belief that the transmission mechanisms that allowed QE1 to succeed are still in place then they could be in for an unpleasant surprise. Whereas during the financial crisis the systemic risks had frozen credit markets and confidence had all-but-evaporated, the problem now is how to move money off corporate balance sheets. With Europe still hanging like a sword of Damocles over the corporate sector, this may yet be some time in coming." From this perspective, more stimulus in the form of bungs for builders (Funding for Lending Scheme) seems plausible.