Thursday 9 August 2012

"Nine reasons why QE is a farce"

Ralph Musgrave summarises.

To me, Reason 4 alone would suffice to show that QE is a farce, but just about any single one of the other eight would do.

My latest blogpost: "Nine reasons why QE is a farce"Tweet this! Posted by Mark Wadsworth at 10:22

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7 comments:

Sarton Bander said...

http://www.businessweek.com/news/2012-08-08/china-may-set-new-property-controls-this-month-securities-says

9 August 2012 at 13:45
James Higham said...

Yes but it's the prevailing orthodoxy, is it not?

Until the crash, that is.

10 August 2012 at 08:16
Mark Wadsworth said...

SB, China's problem is much the same as ours, it's the insiders and the vested interests who a) run the country and b) want the house price and construction boom to continue.

JH, what RM doesn't address is WHY they are doing QE. The answer is to bail out banks and prop up land prices.

10 August 2012 at 11:18
DBC Reed said...

The last word on QE has to go to Anatole Kaletsky in such pieces as "Quantitative Easing for the people" on the Reuters site.This is especially brilliant(as is this week's follow up )because it says what I have been saying all along,but he gets away with it.I suppose it pays to have impeccable academic and professional credentials as he does.

11 August 2012 at 21:00
Derek said...

Agreed, DBCR. Those were an excellent pair of articles.

11 August 2012 at 21:11
Mark Wadsworth said...

DBC and D, well no I don't agree with Koletsky. As Ralph says in his point 4, QE is by and large nothing more than the BoE buying back 1 x £50 note with 100 x 50p pieces.

Admittedly, the BoE was handing out 102 x 5p pieces for every £50 note the bankers gave them to ensure them a margin; and by a circuitous route, QE served to depress short term interest rates* to keep the credit and land price bubble going, which are Bad Things, but it is wildly untrue to say that the BoE gave the bankers £375 billion or even that govt borrowing increased by £375 billion.

* Whether on the facts short term interest rates actually went down is disputed, but this at least was the intention, and the average interest rate available on govt bonds in issue certainly went down because there are fewer long term ones with higher interest rates for sale, and the BoE is only paying 0.5% or 1% interest on the 50p pieces it now has taken as deposits.

11 August 2012 at 22:36
DBC Reed said...

Mark's point is that QE doesn't actually create credit and give it to the banks despite what everyone says.fair enough.But the larger point is surely that the Guv should really create credit and give it to the people to increase demand ,as Major Douglas said all those years ago and Anatole Kaletsky and a few opinionated rabble types are saying now.(Stephanie Flounders was saying on midday news last week that they batted the idea round at the Mervyn King press conference last week)You would be sure it was working or not (unlike with the banks) because you would get a cheque in the post (or whatever) every month.The big danger is that the extra cash would stoke up a new house price bubble or consolidate the existing one,so you need LVT to stop it(Reedonomics 101/ actually all there is to Reedonomics : create credit, bung it about ,stop it going into land values)

12 August 2012 at 09:47

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