Make no mistake, the right thing to do right now is for the Bank of England and the other G7 central banks to engage in further monetary stimulus. If anything, it is past time for us to do so. The economic outlook has turned out to be as grim as forecasts based on historical evidence predicted it would be, given the nature of the recession, the fiscal consolidations underway, and the simultaneity of similar problems across the Western world. Sustained high inflation is not a threat in such an environment, and in fact the inflation that we have suffered due to temporary factors in the UK is about to peak…
So the Bank of England’s very own Bernanke clone wants us to further impair the pricing function of financial markets and would like to import that HUGELY successful US model of having political biddable entities piggy-back off the sovereign credit to lend underpriced credit to borrowers unable to persuade a private lender to accommodate them – as if THAT is ever going to work out well!
Incidentally, does anyone remember what happened to Fannie Mae and Freddie Mac?
Sean, I left this comment at the bottom of Posen’s Evening Standard article: as you can see my grasp of the problem is basic, but more or less on the right track, and I am at least glad it got in.
“Where to begin with this buffoon-ical analysis, Mr Posen? Perhaps with an ad hominem insult. You, sir, are either an economic idiot or a charlatan, or both. You know QE (money-printing) causes inflation, so you pretend the latter does not matter. But Inflation (falsely boosting the supply of money) is ALWAYS and INVARIABLY the fatal flaw in Fiat currency manipulation. It devalues the currency (and thus people’s purchasing power), it destroys people’s savings, it ruins businesses. How? By poisoning ‘money’ as a true store-of value and thus an honest medium of exchange. (Read ‘When Money Dies’). You argue pompously that inflation can be controlled when the time comes, but what Keynsians such as yourself never explain is how. By crushingly high interest rate-rises that throw us all out of our homes, that’s how! Shame on you sir! – If debtor nations could simply print their way out of debt, why didn’t Argentina in the 80s? Why doesn’t Zimbabwe do it now? Whoops, they HAVE done it: that’s why they’ve got hyperinflation! – Of course, none of this even takes into account the fact that your QE ‘advice’ ultimately does nothing but fill the coffers of the bankers who own the so-called ‘Bank of England (actually a private bank) even fuller, insofar as the bonds they ‘buy’ from the government have to be paid back at vast profit using taxes extorted from poor old Jo Public!!! The ignorance of ‘experts’ like you is truly harrowing, Mr Posen, and should be exposed. Shame on you again.
Sean. Posen is a shill for the power elite, as is Cameron. Tomorrow in the US marches a starting in the major cities to get rid of the Fed, and along with it (dreamer) the B of E. They are using the working and producing classes by abhorrent taxation so we are unable to save even enough to live decently in our old age. The system is legal organized crime, a Ponzi scheme. Get out of Europe as well while we still have a chance. Philip