since my lovely wife and I are heading off for a 10th anniversary break, leaving 3 monsters behind to the tender mercies of grandparents. But there’s 20 minutes, and a flurry of stuff about quantitative easing deserves to be noted:
As we all know, the Bank has stuffed another £25bn into this programme. DeAnne Julius thinks it is working in the sense that it has lowered the yields on gilts. That must feel great in the West Midlands. It is not getting through to the real economy, she adds.
Sean O’Grady summarises the pros and cons. Mervyn King has never really acted as if there IS a con. So asset price bubbles are not a problem, apparently. Here they are for his amusement:
* It does little for small businesses and those first-time buyers who have been cut off by the banks
* The money is just creating new bubbles in the stock and commodity markets
* The figures speak for themselves. Even with QE, the economy is still contracting
As Danny of Fathom puts it, ‘If you keep doing the wrong thing, doing more of it doesn’t make it any better. The Bank seems to believe quantitative easing is having a positive impact. We are far less convinced.’
The question that some of us feel very uncertain about is the impact of the unwinding of QE on asset prices. If, as seems to be generally accepted, it has been in fair measure responsible for the recovery in share prices, what happens when that prop is withdrawn?
Ultimately, I’m not surprised that some types think the policy is about creating ‘too much’ inflation. Look at this graph from the Economist’s blogs. Nominal spending/GDP collapses for the first time in a long while (a point made in ‘a balancing act’ at the beginning) making for very different tradeoffs for public policy makers.
Andrew Haldane of the Bank has come out with a scholarly looking speech: I wonder what he makes of this. You won’t find out from me this weekend . . .