Well done, John Redwood:

Someone today on the radio said he could not see how QE led to inflation. He should try looking at how the government overpays for all too many things and how it also slaps extra taxes on which drives prices up further.

Um, what? I am sure there is a mechanism linking QE to inflation, but is this it?  Redwood should read brilliant young monetarist Jamie Dannhauser who is rather more downbeat:

Stagnation in the UK’s broad money supply presents a clear danger to risky assets – and suggests there is a growing chance that the Bank of England will expand its asset purchase facility tomorrow, says Jamie Dannhauser at Lombard Street Research. He says the £200bn of quantitative easing so far has almost certainly prevented a sharp drop in the stock of broad money, and left private sector liquidity conditions far better than they otherwise would have been – though not yet consistent with a sustained recovery.

I don’t agree with everything monetarists say.   People thinking higher gilt prices and more money in investment funds leads to inflation DO need to specify how, in the face of a shattered financial system. And (for the confused commenters below the Redwood column) I have already explained how recent inflation is about base effects.  Calm down, dears.

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