Newsnight: Quantitative Easing

!!!!!!? wrote: »

Interesting discussion - seems that it's rapidly becoming mainstream opinion now that money will be printed. Also, the most optimistic forecasts are putting any sort of recovery in 2010 at the earliest.

When the news is bad and apt to get worse you cannot draw your bearings about the economy or the market from channels of mass communications.

This is a game that President Hoover, in retirement, described as "sustaining the morale of the people."

In spite of these often well-intended gestures, the economy will shift into a contraction that the government will be powerless to abate. Asset prices, especially real estate and stock, will tumble. Credit will contract.

Governments hungry for reelection will panic as the asset contraction gathers force. Their first response will be an attempt to counter the contraction with easy money.

The bad debts of all large borrowers could be added to the government's balance sheet. Central banks could essentially become national pawn shops - economy wide holding companies of insolvent institutions. They could end up owning many banks, perhaps some insurance companies, and a great deal of real estate.

We do not know how long this first state will last, because we do not know how concerted and reckless the government's attempt to rescue bad debts will be. The assumption that it will go to extremes permeates the financial life of the United States as well as other advanced democracies. But this assumption is based upon promises intended to forestall a credit collapse.

Once such a collapse has clearly begun, authorities will probably move to minimise the damage in a bad situation by abandoning the attempt to pay every bad debt. But they will not back down until the market has shown them that they must.

Few will be persuaded by the arguments that deflation would be less costly than runaway inflation. These arguments will have to be proven by the markets.

Paradoxically, that is more apt to happen when the markets are focusing on the dangers of inflation. Therefore, you can expect that fears and alarms about pending inflation will be on everyone's lips, even as deflation takes hold.

The newspapers are likely to run page one headlines about inflationary actions. Analysts who closely follow central bank policy will warn of debasement of the currency and Latin American style inflation.

- James Dale Davidson (1994)

alared wrote: »

For years Brown taxed us to the hilt

SGE1 wrote: »

Factually incorrect. Check http://www.worldwide-tax.com/ - in fact, the UK sits pretty comfortably in the middle of the rest of the OECD countries, when comparing tax rates.