So it seems likely that the Bank of England will announce the beginning of quantitative easing after recognising that interest rate policy will not work if the money supply is not there.
Quantitative easing is quite simply printing more money to increase the money supply to encourage spending.
It is not physically printing money but involves the bank buying up assets from the banks usually government debt to free up some of the money supply.
Edmund Conway writing in the Telegraph this morning says that we are still a long way from the depths of the recession
Yet for all the sound and fury, the full scale of the impact has yet to be felt. It will only be at the end of this year, when unemployment is closer to three million than two million, that we will truly know how it feels to be in the thick of a recession. Sir Fred Goodwin may consider himself a victim of unreasonable public recrimination now, but I dread to think how the revelation of his pension would have gone down six or eight months hence with 10 per cent out of work for the first time since the 1980s.
It is also likely that interest rates will once again be cut down to around 0.5 per cent.
It is a daring strategy.At its worse it could trigger hyperinflation but if successful it may well trigger the start of recovery.The measure though shows how deep this recession is
No comments:
Post a Comment