Douglas Carswell's Blog

More QE is bad news

Today’s decision by the Bank of England to go for more quantitative easing print more money is bad news. 

Firstly, it will not produce sustainable economic growth. Since the credit bubble burst in 2007/08, we have tried this kind monetary stimulus on a vast scale. And it has not worked. 

If monetary stimulus worked, Britain would be booming.      

You cannot engineer prosperity through monetary stimulus today any more than you could engineer growth through fiscal stimulus in the 1970s. Debauched monetarism is no more a route to prosperity than debauched Keynesianism proved to be. 

Nor will doling out phoney money like this breathe new life into zombie banks. If it did, the undead banks would have sprung back to life, Lazarus like, months ago. Many are as dependent on state favours as ever.     

What printing money like this does do is run a massive risk of inflation. While the extra money might sit inert on the balance sheets of the zombie banks for the time being, it will eventually make all those other pounds in circulation seem a lot smaller.  

Savers will suffer.  The prudent punished.  Those engaged in productive economic activity penalised.      

If some are short of credit, today’s initiative suggests that Britain’s politico-economic elite are short of ideas. Having stuck to the same failed script of easy money for years, today they are still fixated on the idea of growth through monetary stimulus.

Four years after the credit bubble burst, they still do not seem to grasp that it was the creation of cheap, artificial credit that got us into this mess in the first place. Simply giving the patient more of what made them ill will fix nothing. 

Today, there is talk of government directly rationing credit to businesses. Has it not occurred to those behind such schemes that the shortage of credit might have something to do with the fact that the price of credit has been kept artificially low? 

Fix the price of anything below the rate at which people are willing to supply it, and you soon get a shortage. 

Britain will recover. Our economy will grow and prosper once again. But that will only happen once we have abandoned this debauched monetarism and returned to honest money and banking.

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