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A split has developed among the men deciding how much money the Bank of England should inject into the ailing UK economy; for two members of the nine-man monetary policy committee (MPC), the £50 billion of quantitative easing announced earlier this month was not enough.
The abridged minutes published by the Bank of England today showed that David Miles and Adam Posen voted against the proposal for an extra £50 billion to further stimulate the economy, calling instead for £75 billion to take the total asset-purchasing programme to £350 billion.
Then again, according to the minutes, some members of the committee – which has in the past been accused of ‘group think’ – also suggested ‘a case could be made for maintaining the stance of policy at this meeting’. This view was based on concerns that the probability of inflation exceeding the target was slightly higher than the Bank’s projections.
Several economists – who read the Bank's minutes closely for signs of its future intentions – described the overall tone of the report as more 'dovish', meaning the MPC members appear to be less concerned about the impact of inflation.
The QE programme has been controversial, with doubts about its impact on the ‘real economy’ – and particular concerns from pensioners who have seen declining annuity rates – but support from many in the City for a programme that is designed to make companies buy up riskier assets, hence pushing equity prices higher.
There is now intense debate as to whether the Bank will extend its purchases further. With inflation set to continue falling, eventually to below the Bank’s 2% target, much depends on the strength of the economy. A 0.2% contraction in the last quarter of 2011 fuelled fears of a return to technical recession (two consecutive quarters of negative growth), but more recent upbeat data means some economists expect the Bank to hold off further stimulatory measures.
One thing is for sure though: the base interest rate will remain at 0.5% for many months to come, with all of members of the MPC in agreement at the latest meeting.
Comments (8)
Quantitative easing is only a solution for mindless people, or where their motives have a much darker side.
12:35 on 22 February 2012
What baffles me is all this bombardment of messages from the Government and the media of the need for us to all collaborate to cut our debt but yet more funny money is being printed...am i missing something here? Many people are being slandered as benefit thieves etc. for claiming money from the state. Where exactly will the QE money ultimately land? Definitely not in the accounts of small and medium sized businesses who desperately need the funds. The money will end up in the pockets of the 1% club and the alleged 'benefit thieves' will get the blame for the increasing debt. If you employ a reductionist approach here, look at the distribution of wealth in terms of raw materials (real wealth) and not paper money, who has it all? Certainly not the 'benefit thieves'. Someone please correct me if i am wrong but i reckon it is not the alleged benefit thieves we have to worry about. All eyes need to move onto the real thieves, those thieves who purport to be working in the interests of the people and our country whilst they are actually 'legally' stealing the real wealth, the real wealth being natural resources, houses etc., not funny money! People make the common error of overlooking this which is exactly why they are being robbed blind. There are too many distractions for people to really see and understand who is gaining the real wealth. Here is something else for you to think about...the bank lends lots of funny money in the boom years. During these years, the funny money pays people to build (or slave whichever word you choose to use) many new houses and buildings. Who ultimately holds all these new developments? Haven't repossessions sky rocketed since the bust? So i guess the people that built all the new buildings don't own them any more...the banks do (via repossession) and of course all the cash buyers who are likely at the top few percent in terms of their net wealth. So the bank dishes out money for people to build and buy new homes. The people build and buy the new homes. The bank takes them back again. And who picks up the tab? The poorest people of course because they are now enslaved to pay off a debt, the money of which was used to buy all the real wealth which the banks and rich people now possess and are in the process of possessing. Watch where the real wealth goes, not the funny money!
12:48 on 22 February 2012
Ryan
Well said! Governments in the USA and UK in particular have been fudging the inflation numbers and other statistics for years. The numbers they talk about are not fit for purpose. Over the last 4 decades or more this country has overall got poorer. How else can you explain the need for both partners in a marriage having to work to make ends meet? This is a total contrast to the 1960's when a man could support his wife and 2 children and buy a home.
The smoke and mirrors economy created by useless politicians who are only ever concerned with getting elected is the main problem. The misleading government statistics are there for the exclusive purpose of showing how good one or other political party has been. The problems we have to face have been created by governments ( with eager support from banks). Chop all the politicians' b....y heads off; overall, we would all much better off without them!
13:07 on 22 February 2012
Ryan..Truffle.
In my experience ( 60 plus years )both partners have had to work if a certain standard of living is desired. It just depends what ambitions you have personally. Yes, you could always live on one wage but would you want to just survive or would you rather strive for some of lifes luxuries.Its a choice you have to make. The government does not compel both partners to work. Indeed in some cases both partners refuse to work and are quite happy to live on benefits. Perhaps this is part of the problem...
Regards,
Graham.
13:23 on 22 February 2012
Adam Posen doesn't surprise me, QE is his pet project. QE does devalue government debt by monetary inflation, it devalues peoples debt by monetary inflation. It devalues peoples cash savings by monetary inflation. It devalues the amount of money we owe China by monetary inflation. In addition to this it gives the government a false market for the sale of its debt which in turn lowers the yield(interest rate) bonds pay. This is the only thing keeping interest rates low which has the added effect of lowering the money anyone is making from savings and lowering the amount of money people pay on borrowings. So QE is suitable for people who owe money as it devalues their debt but it is bad for people who are owed money or own money. So QE is a policy that's excellent for the spend thrift's but very bad for the thrifty.
13:44 on 22 February 2012
You don't need to pay back debt if you have no assets of any value.
Just ignore all the debt companies; don't contact them and in 6 years your debts will be statute barred from recovery.
12 years for mortgage debt.
15:36 on 22 February 2012
Must say that I agree with Ryan's views on QE - the only people who benefit are government & the banking industry.
QE is little more than a double bluff to make the markets happy - the actual money ends up with the banks who are not lending to small businesses, instead they are probably using it to fund their massive salaries & bonuses.
Poor people are having to tighten their belts, governments are not - just take a look at how much of waste & misuse of public funds take place within all the public services - why should local councillors get paid as much as they do? Why should those who fail as CEO (especially within the NHS) be given jobs within the NHS again - it is like a merry go round where people who have not done their job properly are being given bonuses, while the people that are responsible for providing the actual services are facing redundancies, pay freezes etc.
The massive re-organisation of the NHS was not in the manifesto - we should be able to take the politicians to court for dishonesty if they keep breaking their manifesto pledges - let's see if they can legislate for this - they are legislating for nearly every other bloody thing they can think off - we are being led by our noses & all we can do is watch the occupy wall street movement!
15:53 on 22 February 2012
Let Posen adulterate his savings, but he should not impose that on those that saved. effectively continuing the theft promoted by Brown/Balls (with the blessing of Bliar et al) on pensioners, the ultimate savers, and for many years. This penalises their foresight and prudence over many years.
Posen will have and RPI indexed solid gold pension as a reward for supporting govt robbery of savers. Now take away the RPI and indexing of his pension and he might squeal a different tune. And for how long did he have to work for a full pension?
Curious how little we know about the Bank's pension scheme and over how long it is earned. Why, because it is paid, essentially, by the tax payers. It was not affected by the Brown/Balls raids, and it should have been, as should civil service and MPs pensions and the pots. It is not as if there is a pot that they take what it will yield, it is a charge on the tax payers of the future, when the pension falls due.
Let him not featherbed and reward those that over extended themselves but reward the savers and the prudent.
Given that he is advocating more adulteration and 'counterfeiting', do an assessment of his assets, pension etc, and fix the amount and dilute these assets by the amount he is advocating be 'printed'. That would only be fair.
19:26 on 22 February 2012
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