Tag Archives: quantitative easing

On Policies, Perceptions and Potentials

In theory, theory and practice are the same. In practice, they are not. (Anon.)

“Lack of social mobility” and “austerity” confront us. Perhaps much of what we might, and might not do, depends upon information, perceptions and attitudes?

In 2019 our public spending is about 38% of GDP, with the USA at about 36%, Germany at 42%, France 56% and Italy 36%.

In 2010 our national debt to GDP ratio was 53%. In 2018 it was 87%. Equivalent 2017 figures are: France – 98.5%; Germany – 64.1%; Japan – 222.3%; USA – 103.8%.

Since 2010, more than £30 billion has been cut from welfare payments, housing subsidies and social services. About 66% of “poor” children are in families with at least one parent working. Between 2012 and 2019, the number of children fed from food banks has more than tripled. Since 2010 homelessness has increased by 169%. The slowdown ln UK life expectancy is one of the highest in the G20 countries.

The above data, our own experience of people begging and living on our streets, and reliable reports that needed, skilled workers (such as nurses) use foodbanks, indicate that “austerity” has done great social harm.

Ten years on, the “deficit” is far from being removed, £billions of welfare budget cuts are planned and “austerity” has resulted in the slowest UK economic recovery in a century.

Perhaps we now need to campaign for its cessation and, if possible, its rectification? (The Institute for Fiscal Studies estimates that “rectification” needs expenditure of at least £12.4 bn above current budgetary projections.)

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Opinion: Two ways to help fix the global crisis

It has long become clear that the financial crisis has been on a scale deeper and larger than many people have suspected. It has also been exacerbated by muddled policy responses from all Governments and policy makers. Whilst the need to control debt is not in doubt, capital expenditure projects should be pursued and tighter bank regulations need introducing (with much clearer splits between retail and investment banks); all economies are still struggling.

Step one: better Quantitative Easing

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Opinion: Inflation the biggest threat to economic growth

Economic commentators and politicians searching for that most elusive of phenomena – economic growth appear to be operating a back to basics approach. The Bank of England takes the traditional neo-classical approach to its role as arbiter of monetary policy – Quantitative Easing and liquidity schemes to expand the money supply and make borrowing cheaper to incentivise businesses to expand. The government are taking a much more Keynesian route to growth, announcing house building schemes and other infrastructure initiatives in order that the state injects the demand into the economy …

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Opinion: Monetary policy is political, so where’s the democracy?

We are in extraordinary economic times, which have led to extraordinary measures from the Bank of England in its attempt to help steer us out of the storm. The Bank appears to be terrified at the prospect of deflation and the depressive effect it could have. Not only have base interest rates been pinned to a historical low of 0.5% for well over three years, the Bank has also used Quantitative Easing to pump £325 billion of newly created money into the economy.

We now know more about the effect that QE is having and it should send shivers down the …

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QE “benefits the better off” say Bank of England – so why are we still doing it?

In the first comprehensive report it has conducted into the impact of its Quantitative Easing (QE) policies on the UK economy, the Bank of England says that QE has “prevented a deeper recession” but that the policy “benefits the top 5% of households”.

It is the contention of this article that the central bank is broadly correct on both of those points-which begs the question, why is the Bank of England intent on pursuing the policy in the future?

I have previously written that QE has had the effect of preventing a deeper recession by effectively ending the credit crunch, but that it is limited in its capacity to deliver growth.

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Opinion: More QE is not the solution to Britain’s economic challenges

With the predictability of a partner changing ‘our’ plans at the last minute, the announcement that UK inflation has fallen to its lowest level for two and a half years has been greeted with calls for more Quantitative Easing (QE) to stimulate growth.

Much of the media presentation of the facts of this latest inflation data has focused on the fall being a ‘surprise’. In reality most of the drop was predictable enough, as the article I link to above states, the VAT increase in 2011 fell off the index for the first time in May, while the situation in Iran has stabilised, causing oil prices to fall.

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Opinion: Clutching at straws

I have spent the day clutching at a couple of straws.

Last week in the tractor factory Nick Clegg appeared to confuse the ‘deficit’ with the National Debt when he said, “We have a moral duty to the next generation to wipe the slate clean for them of debt. We have set out a plan – it lasts about six or seven years – to wipe the slate clean to rid people of the deadweight of debt that has been built up over time.”

It sounded like a fail in GCSE Economics. But suppose he wasn’t mistaking the policy to eliminate the structural deficit by 2017 for a moral crusade to wipe the slate clean by removing the deadweight of the National Debt, all £1,300 billion of it.

At the other end of my straw was the realisation that Nick Clegg might have become an extreme Market Monetarist and was revealing his plan to re-establish Nominal GDP back to its trend line, even if that meant buying in the whole of the National Debt in the mother of all quantitative easing exercises.

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Opinion: Getting radical with the money supply

Last week the OECD forecast that Britain was about to experience a double-dip recession, for the first time since 1975. Vince Cable in his Centreforum paper Moving from the financial crisis to sustainable growth asks “How far should monetary policy now be expanded further in the UK to boost demand and head off a period of poor growth?

He goes on to say “There is no possibility for further meaningful interest rate cuts – real short term rates are now minus 4 percent. That means further recourse to quantitative easing.

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Opinion: Intelligent quantitative easing is best hope to stop the bleeding and begin reviving the patient

At our party Conference in Birmingham I described accelerated fiscal consolidation as pure poison: “Poison for the party, poison for the Coalition and, most important, poison for the country.”

I know that Liberal Democrats in ministerial office cannot be heard to say such things in public. But Liberal Democrats who do not have to labour under the restraints of office should be making it plain how oxymoronic ‘expansionary accelerated fiscal consolidation’ really is.

They will be in good and growing company.

The announcement of a further round of Quantitative Easing (QE) – much larger than the financial press had anticipated and a month …

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Opinion: Quantitative Easing would be a grave mistake

The recent comments from Bank Of England Governor Mevyn King , regarding the possibility of quantitative easing make little sense in the context of the Coalition’s current economic strategy and are contrary to broad Lib Dem principals.

The pre-election debate on the economy centred on whether the recovery was strong enough at present to sustain cuts, it is the opinion of Lib Dems, and a view I agree with, that the economy is strong enough to sustain such an action.

This view can be boiled down to believing that the level of aggregate demand in the economy has reached a point …

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Opinion: How to make QE into good Liberal Democrat policy

In the last week, there has been a silly fuss about the risk posed by a hung parliament following the next general election. Nick Clegg has scotched the idea that the Liberal Democrats would undermine stability. In fact, his party has taken far more steps than the others to demonstrate credibility to the markets. Cherished policies have been sidelined in the interest of stablity.

The UK’s leading economics writer, Martin Wolf, agrees that there is nothing to fear from minority government, adding: “I cannot be the only person who believes that Vince Cable is far better qualified …

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LibLink: Giles Wilkes – The hidden cost of quantitative easing

Over at The Guardian’s Comment Is Free website, Lib Dem blogger Giles Wilkes – liberal think-tank Centre Forum‘s award-winning chief economist – argues that though quantitative easing was needed to prevent financial collapse, it has made the rich richer, and taxpayers will foot the bill for growing inequality. Here’s an excerpt (but NewsHound does recommend you read the full article to enjoy Giles’s imagined budget speech of a year ago):

QE was the right thing to do: it may become the most significant step that Labour took to fight recession. … quite possibly averted an outcome far worse: an

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Recent Comments

  • User AvatarTony Greaves 19th May - 10:09pm
    Thanks for posting this - it's reminded me to put it in my diary!
  • User AvatarMichael 1 19th May - 10:04pm
    @Jayne Mansfield Jenkins made, as one would expect from him made a very elegant argument for his system and there have been top-up systems introduced...
  • User AvatarMichael 1 19th May - 9:04pm
    @John Marriott Heseltine did mention standing as a "Conservative and National Liberal", I think, in a recent interview but it was I think more a...
  • User AvatarGlenn 19th May - 9:02pm
    The second one isn't me
  • User AvatarJayne Mansfield 19th May - 8:39pm
    @ Glenn, Have you started talking to yourself?
  • User AvatarJoseph Bourke 19th May - 8:25pm
    Good points Katharine. We should only promise what we are certain we can deliver. At the same time there has to a vision of a...