Skip to content

Solanum’s new report

Nor was there at the time that QE was introduced any serious discussion about whether
or how the asset purchases to be made under that programme should or would be

Oh, right. So all the talk about how QE was temporary, could be reversed by simply selling the bonds back into the market, didn’t happen then?

I mean I know the conversation happened, I took part in it.

All that we do know is that low interest rates and QE, which together represent loose
monetary policy, were an inevitable response to overly tight fiscal policy from 2010
onwards. Austerity commenced in 2010. The large resulting cuts in public spending
and increases in taxes

What cuts in spending?

What we also know is that during this period inflation was low and on a declining trend
despite the fact that QE is inherently inflationary

Cool, so when we’ve got inflation we should stop[ doing it then. Which, os course, is not what he recommends at all.

albeit that opportunity was not
taken by either the government or the private sector to exploit this opportunity
to make necessary investment at low cost. For example, fixed fifteen or thirty
year mortgages could have been introduced, as operate in the United States,

He does know that system went bust in 2008/9, right? Freddie and Fannie went tits up?

Further, fixed rate mortgages require someone, somewhere, to carry interest rate risk. Meaning bond holders. This, in turn, means a massive expansion of the trade in second hand pieces of paper. You know, people saving without making any investment in real assets because someone, somewhere, has to be buying those bonds. This call is entirely the opposite of his more normal one.

We are in fact of the opinion that a policy of QT would be harmful, and potentially
extremely harmful to the UK economy, because:
a. QT will require increased real (inflation adjusted) interest rates in that economy.
These increases are already forecast by the Bank of England and Office for
Budget Responsibility for the next few years.

Real interest rates are just such a silly idea, aren’t they?

We also think QT and the associated policy of reducing or eliminating the APF is
unnecessary because:
a. There is no evidence that UK or other financial markets have the capacity to
absorb the sale of more than £800 billion of UK government gilts either now or
in the future without

Amazing, folk don’t want that ability to save safely with the government after all. Another argument bites the dust.

It doesn’t get any better either.

So, a reader’s poll. Who is damaging their reputation more here? Blanchflower for writing with Spud? The Solanum for reneging on all his other arguments? Or Larry Elliott for taking this guff seriously enough to write it up in The Guardian? All of the above?

13 thoughts on “Solanum’s new report”

  1. I assumed Blanchflower teaming up with Spud was an acknowledgement that his (Blanchy’s) credibility was already shot to pieces. As for Elliott, he’s got space to fill, if it’s not this guff it will be some other, and 99% of his readers won’t understand the article or its failings, so who cares?

    Re: ‘austerity’ – I have never been a fan of Osborne but getting wild spaffing of taxed and borrowed cash described as austerity was a quite an achievement.

  2. Sometimes I have this nightmare where I dream that Murphy is running our economy and Greta Thunberg is running our energy policy. Then I wake up and…

  3. We are of the opinion that the policy of QE used by successive Labour, coalition and
    Conservative governments in the UK since 2009 has been a success.

    Fuck! Heaven knows what they’d regard as a failure.

  4. Face it Tim, you’re not getting QT. Its over. Money creation is back on the table, as it always was going to be. QE was the politicians printing money and spending it, and they never had any intention of ever unspending it. It may have been done under the theoretical framework of a ‘central bank monetary operation’ just to appease the economic wonks like yourself, who have this rather touching faith in the honesty and independence of public officials, but it was just all a cover. QE was never made to be reversed, at the first sign of trouble the printing taps will always be turned on again. The toothpaste isn’t going back in the tube, even if they make a halfhearted attempt to try and shove some back in. You chose the wrong horse, sorry.

  5. BiS

    Whether intentional or not – that did make me laugh out loud to the extent I nearly choked on my coffee.

  6. I’d agree with you Jim. The mistake’s thinking it’s about economics. When it’s always about individuals doing what’s to their personal advantage.
    Don’t know why economists fall for it. When economics tells them exactly that. People attempt to maximise what they perceive their own advantage.

  7. This little gem says all you need to know about the paper – just some guff to fit professor potato’s grand plan that the state should be ever bigger with him as the fat controller summed up here…. (And wtf is UYK anyway?)…..

    QE might over-inflate the size of the state. We note the current crises in many public sector services that cannot meet demand within the UYK economy and suggest that if anything the state might be too small at present as a result.

  8. We note the current crises in many public sector services that cannot meet demand within the UYK economy and suggest that if anything the state might be too small at present as a result.

    See V-P? It’s the way he tells them. You can’t beat it. It’s comedy gold.

  9. As I pointed out previously, ‘Danny’ may have a track record as long as your arm for always being wrong in his predictions, but that’s no block to progress in macroeconomics (and many other, more serious, fields, these days). He’s a real (retired now, I think) economics prof at an Ivy League university, so why would he debase himself by collaborating with the Spud? What could the latter contribute to this ‘paper’ that would improve it?

  10. Danny is the loser here

    As anyone who walks through parks knows, it takes a hell of a long time to clean that dog shit off your shoes and, even when you do, you never quite get rid of the smell…

  11. Blanchflower, together with fellow economist Richard Murphy

    That’s quite amusing

    Rejecting the idea that quantitative easing (QE) had caused inflation to hit its highest level in four decades

    Well it’s certainly a contributory, if not the sole factor – my guess is Murphy had walked out of lectures prior to the MV equation during his undergraduate days – getting in some practice for latterly sitting in the pub while a ringer sat his accountancy exams and being barred from a series of hostelries in Downham Market

    We urge them to grab this opportunity instead of heading us towards almost inevitable recession or even depression, so severe could the impact of QT be.”

    They know MMT was nonsense and obviously can feel the siren call of the Hooverville – maybe more so in Murphy’s case.

    Murphy said QE had been “benign and saved the country from many of the worst impacts of the austerity pursued by successive governments since 2010 without creating the current inflation we are suffering.

    From his perspective you have to think it has been benign – has certainly enabled him to ride the gravy train of third sector/ public sector largesse without having to do anything useful. Might not be so for the rest of us

    You were right BiS. A fusillade of gems (for such a short indirectly written article)

Leave a Reply

Your email address will not be published. Required fields are marked *