Tuesday, February 16, 2010

Another surprise

Quantitative easing, a harmless sounding term yet with very serious consequences. Back in January 2009 the government announced that because of the recession (that started in America and we're best placed to come out of it, yes that recession) they were going to break a 165 year old law and pump money into the economy to cover their spending and debts.

The Government is set to throw out the 165-year old law that obliges the Bank to publish a weekly account of its balance sheet – a move that will allow it theoretically to embark covertly on so-called quantitative easing. The Banking Bill, which is currently passing through Parliament, abolishes a key section of the law laid down by Robert Peel's Government in 1844 which originally granted the Bank the sole right to print UK money.
The ostensible reason for the reform, which means the Bank will not have to print details of its own accounts and the amount of notes and coins flowing through the UK economy, is to allow the Bank more power to overhaul troubled financial institutions in the future, under its Special Resolution Authority.
Many at the time warned that this was economic idiocy (something Labour seem to excel at, they ought to remember socialism is a political theory, not an economic one) and one result of this would be inflation.

The UK inflation rate rose to 3.5% in January - the fastest annual pace for 14 months - from 2.9% the month before, official figures have shown.
Consumer Prices Index (CPI) inflation was driven up by VAT returning to 17.5% and higher petrol prices.
Retail Prices Index (RPI) inflation which includes housing costs, rose up to 3.7% in January, up from 2.4%.
Bank of England governor Mervyn King has had to write a letter of explanation to the chancellor.
That would be the "I told you so" letter. 
When will people stop electing Labour and/or socialists into positions of power? Every time we do this the economy is left wrecked, unemployment is higher and personal debt is eating a hole into our savings. This last government have taken economic illiteracy to new heights, wrecked our pensions, spent more than they took in by taxes so printed more money to cover, raised taxes, left us (assuming people are smart enough to vote them out) with inflation devaluing our currency and generally treat us like fools with their "no more boom and bust" mantra. Yet where the Tories should be ahead in the polls to the point of wiping out the Labour party from the electoral landscape, they're only just 10 points (if that) ahead. Seems all the Tories can offer is higher taxation too, and that will never sell, mind you a handfull of broken "Cast Iron" promises by Ding Cameron haven't helped one bit.
It's probably too late for the Tories to change their leadership team, but it's fast becoming obvious that they are yesterdays men, caught up in the Blairite philosophy of jam today.
One day no doubt we'll get the necessary government needed to get us out of the EU and out of recession, but I don't think it's going to happen any time soon, at the moment they're all to concerned with dipping their hands into our pockets.

2 annotations:

Anonymous said...

Good post. I anticipate inflation at frightening rates quite soon.

JuliaM said...

"When will people stop electing Labour and/or socialists into positions of power? "

When they cease to get their livelihoods (civil service jobs or generous welfare payments and rates and tax credits and...) paid for by them.