It is true that monetary and fiscal policy both affect the economy. And yet:
But the idea should be to use a combination of monetary and fiscal policy to bring inflation down with the minimum amount of collateral damage. At a time when the Bank is in danger of being spooked into over-aggressive increases, it would make sense for the chancellor to be pushing in the opposite direction. The upshot of having monetary and fiscal policy pushing in the same direction will be an increase in company failures, higher unemployment and weaker consumer demand. The recession will be deeper and longer, making it harder for the government to meet its targets for borrowing and debt.
Really, just no. If each type of policy – fiscal, monetary – picks up a bit of the weight then the other has to pick up less. So, if fiscal policy were expansionary right now then monetary policy – to reach the same end policy goal – would have to be even more restrictive. Even higher interest rates, even more QT. If fiscal policy is mildly contractionary (and note, please, it’s the change in the deficit that defines this, not the size of it) then monetary policy only needs to be mildly contractionary too.
Asking for expansionary fiscal policy means insisting upon even more restrictive monetary policy – the other way around from what you’re saying.
I read that the collapse in the price of gilts didn’t start after the Kwarteng budget, but rather after the BoE’s raising of interest rate the day before. The suggestion is that “the markets” were alarmed that the rise was smaller than the Fed’s and that the UK’s QT was going to be too harsh.
Pity that the papers and the Beeb didn’t mention this matter of timing, eh? I accept that Ms Truss is probably useless and frivolous but it still looks to me as if she’s been brought down by a coup by The Establishment.
it is strange really. The problem is government, but we don’t seem to want to talk about that!
Not government per se, but what the bastards in Parliament and Whitehall actually do. After all these years of celebrating a failed attempt to bring it to an end, now is the time when a more effective termination would generate a rather large cheer. I know Cromwell was a complete bastard who deserved his fate, but that one speech to the leeches in the Commons made it all worthwhile!