In 2008 and 2020 economic crises were averted using government-created money and the Bank of England’s quantitative easing process. Interventions on those occasions were of £150bn or more. It is quite likely that a further £200bn will be necessary in the coming year if the meltdown of our economy is to be avoided. Intervention on such a scale, coupled with cuts in interest rates, energy price reform, nationalising energy supply and investment in new technologies could save us from the catastrophe currently awaiting us.
Blanchflower, Prem and Spud, in the FT.
They’re going to print more money and reduce interest rates to deal with inflation.
Well done lads, yes, well done.
I think the realization is dawning on them, however dimly, that Murphy and his ilk are directly responsible for the coming calamity through QE, Lockdowns and Net Zero.
He may well start to anticipate the feel the pull of the rope around his neck as howling mobs stalk the landscape looking for ‘Guilty Men’. I certainly hope so.
So should we start learning Mandarin now, or Russian?
I like speaking Russian because it sounds like you’re in a James Bond film or something, but Chinese kung fu movies are a lot more entertaining and their food is better.
Since the introduction of QE and artificially depressed interest rates the growth rate of the economy has been lower than it was in the 1930s, the Great Depression.
Yet they call it a success, having “averted” economic crisis and meltdown.
“the meltdown of our economy ”
There are various expressions that always stop me reading further. They include American Dream, Special Relationship, meltdown, zombie, kickstart.
Hang on; and “turbocharge”. And almost everyone who witters about “inflection point” or “nonlinear”. Or “quantum jump”. Or …
Meltdown Zombie were a kickass band.
So you’re admitting that QE is money printing then? Or is it only money printing when Spud does it, but not we you agree with it?
Not being an economist, I view the raising of interest rates to dampen demand when it is government engineered reduction in supply that has caused the inflation, as seeing a man drowning and helping him by putting a foot on his head.
It’s never occurred to them that to tackle average price rises (which can be a consequence of inflation and is itself not inflation) that they could dampen demand not by raising interest rates but by cutting the size of the state. They only want to crush private sector spending because that’s how the steal wealth from the private sector from their continued monetary policy. This is all the obvious conclusion of the the choices the state made.
Jim
I may be quite slow, but is there anyone here who doesn’t agree QE is money-printing? I have agreed with it various points; wouldn’t now. I still know it’s money-printing though.
What we need is a good dose of that Patrick Minford medicine. High interest rates as we had in 1980. Yes, that’s the ticket.
Because low interest rates are so very bad, regardless of inflation rates. Zombie companies (and we all just know what they are and we know they aren’t imagined at all) must be destroyed, just like real-life zombies (sort of). Without the economic hair-shirt there cannot be growth, just cannot.
And Patrick Minford isn’t Richard Murphy antimatter at all, spouting out his recipe regardless of fact, circumstance and economic conditions. Not at all.
And none of them know what ‘inflation’ actually is.
“I may be quite slow, but is there anyone here who doesn’t agree QE is money-printing? ”
Our host has been very vociferous that the QE that was enacted in 2008 was definitely NOT money printing, it was something else entirely.
No, I’ve always said it’s money printing, money creation. What I’ve also said is that it wasn’t spent into the economy but instead went into the banking system.
It was an injection of liquidity when that was in short supply. But low interest rates have enabled a lot of zombie companies to prosper and now the tide is going out. Joules, Cakebox are just the starters
What we need is for macroeconomics (any macroeconomics) to become a capital crime.
Because low interest rates are so very bad, regardless of inflation rates.
Entirely correct sir.
Any interest rate below the time preference rate* is theft.
*Around 5% real?
No, I’ve always said it’s money printing, money creation. What I’ve also said is that it wasn’t spent into the economy but instead went into the banking system.
Is the banking system not part of the economy then?
And just beacause it went into the banking system rather than being randomly chucked out of helicopters doesn’t mean that it didn’t end up in parts of the economy that aren’t the banking system. We know it must have done, just as we know it was meant to, for as someone we know once said –
– the whole point of quantitative easing is to decrease returns on safe assets and thus push investors out along the risk curve –
– which is sort of another way of saying that inflating the money supply way bigger than actual wealth in goods and services makes people fucking stupid.
Does the world seem a bit fucking stupid to you right now? Because it does to me.
“What I’ve also said is that it wasn’t spent into the economy but instead went into the banking system.”
What did the government do with all hundreds of billions it got from issuing gilts in the years post GFC that were bought by the BoE then? Stick them in its sock drawer?
Can you also please explain why QE in 2008 ‘didn’t get into the real economy’ whereas QE in 2020/21 did (being used to buy PPE/pay furlough/generally spaff up a wall) despite the QE process used by the BoE being identical in both cases?
If inflation is psychological noise, as Fischer Black says in “Noise”, why not print the money being demanded by price setters and give it to everyone via an inflation-protected basic income?
“In 2008 and 2020 the can was kicked down the road using government-created money….
Fixed it.
There is a difference between the central bank printing money to acquire existing government debt, the central bank printing money to acquire new government debt and the central bank printing money to acquire commercial corporate debt.
“Any interest rate below the time preference rate* is theft.”
Patrick Minford dispenses the Kool-Aid; the cult members guzzle it down.
Ironman
You have to take Minford with a pinch of Salt and realize he has been banging the same drum for more than 40 years. What I would say in his defense is he is significantly more advanced in his economic understanding than Murphy (in fairness almost anyone able to turn on a PC is probably more advanced than him) and on a personal level is far more amenable to being able to have a civilized debate, rather than simply ‘blocking’ you.
Obviously I agree with your assessment of his shortcomings – Good to see you in the comments again BTW.