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
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?