Record from a recent anecdote on quantitative easing: its effects. One hundred loaves at £1 each and the central bank releases a sum of £100 to combat a lack of growth; one hundred loaves now cost £2. The simple and clear link between money and inflation is not replicated so easily in our economy. Yet, the lack of evidence that QE has helped prevent recession and its distortion of the gilt market has led to cries of anger over its longer term effects.
By depending upon the reliance of aggregated savers for predicatble returns via their pooled funds, the Bank of England and the Tory party have collaborated in grand theft auto by stealth inflation. Frugal Peter has been robbed. But has that helped Profligate Paul? Compared to the United States, our deleveraging process in the private sector has not even commenced. After three years we are further away from making the necessary adjustment. And at what cost? By damaging savings, returns and investment, the Bank of England has crippled the economy and impoverished pensioners. No wonder companies are sitting on cash refusing to invest; who would, with such a government: reward scroungers, penalise thrift!
This may have been designed to erode the public sector deficit, but as a consequence and contra to the majority opinion, QE may have prolonged stagnation. The private sector has been handicapped at the expense of the public domain, accentuating the impact of austerity and dousing animal spirits.
It is a one time offer from this government. The lack of urgency, the unwillingness to reform, the lack of bite in cutting expenditure, suggests that Osborne's complacency and micromanagement will come back to assault him. None of the political will to deal with this is displayed and the coalition's courage from 2010 is beginning to look like rigid rails, unable to turn aside or reverse if terms of trade worsen.
The coalition will defer to the ghost of Macmillan: events...
