Today's Coming Crisis Movie

Saturday, September 24, 2011

Quantitative easing demonstrably failed; the Chancellor should not allow a second bout

The IMF's figures are pitilessly clear. The countries which decreed the biggest bailouts and stimulus packages, the countries which printed the most money, are suffering the slowest growth.

The Bank of England's 'quantitative easing' was, in proportionate terms, bigger even than the Fed's. Result? Our inflation rate is higher than our competitors', our economy commensurately depressed. That's what inflation does: it disincentivizes work, punishes thrift and undermines productivity.

No amount of empirical evidence, however, seems to deter the Monetary Policy Committee. As the record of its last meeting make clear, the MPC is gearing up for another splurge.

I suspect the necessarily dry minutes fail to do justice to the comic richness of the deliberations:

Blackadder: 'It's the same plan that we used last time and the seventeen times before that.'

Mervyn King: 'Exactly! And that is what is so brilliant about it! It will catch the watchful Hun totally off guard! Doing precisely what we've done eighteen times before is the last thing they'll expect us to do this time!'

When Gordon Brown and the Bank of England set out on this wretched course, George Osborne declared that 'printing money is the last resort of desperate governments', which is as neat an encapsulation of the phenomenon as you could ask. Inflation erodes the government's debt; but it does so at terrible cost to everyone else. more