Realist, not conformist analysis of the latest financial, business and political news

Sheesh – The Observer Insists The Bank Of England Should Stop QE From Working

That not all people grasp all of the intricacies of economics is true. And that’s also fine, we don’t all need to understand it, just as we don’t all need to grasp the intricacies of oncology nor the difference between line, clog and ballet dancing. Those who are interested can bother, the rest of us can contemplate Rula Lenska instead.

However, if your employment is to produce economic leaders for a national newspaper then it might be a good idea to bone up – just a little maybe – on the subject under discussion, economics. A test The Observer fails here:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] But the City’s future is important, even when it poses huge difficulties for a nation scarred by the financial crash and years of growing inequality. The industry is a major exporter, taxpayer and employer.

For Britain to tolerate the City, Carney should say, it must be kept on a short leash. The pressure from shareholders to meet expectations of unfeasibly high returns means risky behaviour is lodged in its DNA. That pressure is only building as safe assets continue to offer low or no returns. We know banks have already loaned huge amounts to companies that may never pay them back. Investment funds have also taken risks that could turn sour and quickly lead to bankruptcy. When bankers don’t fear the reaper, Carney should be clear that every angle must be covered to prevent another crash. That means the Bank should not just be watching, but be prepared to put restrictions on, every aspect of wheeler-dealing – from unstable property markets to derivatives so complex they are impenetrable. A slower pace of innovation will be a price worth paying to avoid another crash. [/perfectpullquote]


The entire point of quantitative easing was to make sure that low risk assets provided low to no returns. So as to push income seekers out along the risk curve and thereby generate more investment in the real economy. The very point of the whole process is to make people accept more risk.

It’s what pulled us out of that last recession and crash, that QE. So, now the Observer is shouting that the Bank of England mustn’t be doing what has been the basic and announced policy of the Bank of England this past decade. Which actually could be fair enough to be honest. “We think QE was a bad idea” is a fair opinion. May or may not be a correct one but it’s fair.

What’s idiocy is not being able to note that that’s what the demand is – and the Observer doesn’t so therefore….

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4 years ago

The trouble is, whilst very few of us think we know better than the oncologist, almost everybody thinks they know better than the economist. Or at least the economist espousing policies they don’t like much.

Matt Ryan
Matt Ryan
4 years ago

You could read this as a request to start to unwind QE which does need to happen at some point to normalise the economy. We’re almost at the point in the cycle where we should have another recession so what’s in the toolbox this time?

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