It takes a special style of incompetence of the sort that only a Governor of the Bank of England with no experience of the real world can have to talk about reselling QE assets back into the market at this stage in the current economic cycle, but that’s what Bank of England Governor Andrew Bailey did yesterday.
Bailey said that when the time comes to then he’d favour reducing the balance sheet – selling QE gilts back into the market – rather than raising interest rates.
Snippa then goes off on one about how this is really terrible right now. Entirely missing the bit about “when the time comes”.
Snippa even tells us, correctly enough at this level of detail, when that time will be:
But what it also shows is that he has no clue about the realities of the balance sheet he is supposedly managing. His balance sheet is too big if there is inflation.
Yep, so when inflation turns up – or is likely to, given that monetary policy has a lag before it takes effect – then the BoE should redice the size of the balance sheet.
What’s got Snippa hysterically clutching those pearls is obvious enough though. If we start having discussions about when to reduce the size of that balance sheet then his insistence that QE debt isn’t even potentially part of the national debt rather fades away. And that would never do, would it?