So far, so QE.
Given that inflation is at 0% and interest rates are at 0.5% why should we be remotely scared about an increase in either? Also, given that £375bn of QE hasn't made a dent in these figures why should would believe that a £50bn PQE would suddenly have a drastic effect?
The QE money had little impact on inflation, because circumstances dictated only a limited amount made its way into the real economy. It too was only originally intended to be £50bn, but it quickly becomes addictive.
Like I said in my previous post, the aim of QE wasn't to flood the economy with cash. It was to reduce the burden of government debt, to stop the financial system seizing up, and help control base rates..
It's not a magic wand, to ply everyone with cash. It was a solution which bought the economy time to recover, and limited damage. Much of the pain is still ahead.
Since the QE program was started, commodity prices have remained relatively depressed, the world has remained a fearful place due to the crash, and there has been austerity in the UK and much of the western world. This also helped keep inflation low.
The money still has the potential to cause serious problems though. If a £375bn QE program had been implemented in 2007, there would have been meltdown. As the economic mindset shifts slowly back to the pre-crash "norm", QE will need to be carefully managed. The point is, it is [hopefully] manageable. The BoE can regulate it in the normal way, and can recover the money when it needs.
You should also consider than there has been significant inflation in parts of the economy which are not included in the headline figures. The stock market, housing, antiques, wine, art, classic cars. Some of this has been fuelled by QE cash, particularly the stock market and housing, which could be the basis for the next crash.
QE has and will cause inflation. It's not yet clear how much, and the impact will depend on how the program is rolled back.
Wrong. The "borrower" in the British government and it has every ability to pay back the bonds.
If a JC led Labour government intended to pay the money back, why not just borrow the money in the usual way?
What he seems to be asking for is a free loan. Because "the banks have had one", which is a lie.
But, come on, QE is never going to be unravelled. It's never going to happen. These bonds will be rolled on until the end of time.
Holding the bonds is of no direct benefit to the BoE, and they own them and are responsible for monetary policy.
Offloading that quantity of bonds is going to take time, it will probably take longer to sell them off than it took to buy, which was 6 years. But they will do it. As above.
Inflation has many beneficial effects as well as negative ones and, as to damaging exports, I'm not sure what your argument there is, usually a weaker currency helps rather than hinders exports. The question of inflation should be about balancing those factors to best benefit not merely trying to fix inflation to an arbitrary target (2%) or eliminate it altogether. Right now, our economy is heavily indebted and we should be targeting a noticeable increase in inflation - preferably wage led - to help reduce the burden in a managed fashion.
I agree there is no "correct" level of inflation, but 2% is considered the goldielocks spot. High relative inflation makes a country uncompetitive, unstable and less investable. The price of goods don't only go up at home, they go up abroad too. It also erodes purchasing power parity. Higher rates invariably spiral, and the inevitable clampdown results in far higher interest rates than would have been required if inflation had been kept at sensible levels. This hurts everyone, including the government and government investment.
There is a reason day-to-day monetary policy was taken out of government hands. They alway found a excuse to rig it for short term gain. This only leads to more damaging action further down the tracks. Central bank independence is now the norm in developed economies, and 2% inflation is a typical target rate
The economic returns of money invested means that everything spent should be returned many times over.
I'm not against the government investing money. Some of the proposed investment sound interesting. If they believe they will benefit the country, they should find the conviction to get the money by honest means.
