Brits More Critical About 'Quantitative Easing' than Americans

It's probably fair to say that they're making a much bigger deal about "quantitative easing" (better known as "money printing") in the U.K. than in the U.S. and for good reason. As a percent of GDP, the amount of money "created out of thin air" in an effort to aid the economy is comparable, however, the U.S. has succeeded in producing at least one quarter of economic growth since the recession began almost two years ago while the Brits have nil.

The tone of the coverage, however, is much different, the latest example being this story at the Telegraph after word that the Bank of England plans to buy even more government bonds.

Bank of England expands money-printing programme to £200bn to fight downturn
The Bank of England has expanded its radical programme of printing money by a further £25bn today as the fight against the deepest downturn for decades is stepped up.

The unconventional plan, which is known as quantitative easing (QE) and was first adopted by the MPC in March, will now see the Bank buy a total of £200bn of UK government bonds, or gilts, and other assets from from financial institutions in the hope the money spent will be invested in the wider economy. Some economists expected the programme to be increased to £225bn.

The paper is full of related stories and has been for months now, the criticism coming fast and furious from the Telegraph and elsewhere.

In contrast, in the U.S., it seems as though you're considered some kind of a nutball or "teabagger" if you complain about the Fed's printing press running overtime.

As best I can tell, that's not so on the other side of the Atlantic. The fact that Prime Minister Gordon Brown is widely viewed as being responsible for the current mess the British find themselves in probably has a lot to do with that.

Anyway, back to the BOE decision and the appearance of yet another colorful equivalent to an American expression as highlighted below.

Experts admit that it's hard to judge whether the policy is working, but with the economy still languishing in recession last quarter, most reckon it's worth expanding.

"The UK economy is still in the High Dependency Unit, but without QE it might have been in Intensive Care, or worse," said Stephen Boyle, head of economics at Royal Bank of Scotland. "The extension of the Bank's asset purchase scheme today reminds us that the risks of doing too little considerably outweigh the risks of doing too much."

The MPC also kept interest rates at the record low level of 0.5pc in an effort to keep money as cheap as possible.

They note that the BOE will soon hold government debt equal to 15 percent of the country's GDP. In the U.S., that would work out to be about 2.1 trillion, about the size of the Federal Reserve's balance sheet that contains less than a trillion dollars in U.S. Treasuries, most of the balance consisting of mortgage backed securities and GSE debt, which, for all intents and purposes are also government liabilities.

Well, at least the British press is maintaining a sense of humor about it all - here's the Bank of England doing some "hoovering".
Yes, "hoovering". We learned that one years ago while visiting. When asked if our room was ready yet, the kind lady at the front desk replied, "They're just finishing up the hoovering".

Of course, we chuckled.

Comments

[Davewmart:]

'teabagger?'
I trust you are not referring to the second of the definitions given here:
www.urbandictionary.co...

Nov 05 06:04 PM

[Funda-Mental:]

Must be that they have some principles others lack.. ..They are not completely captured by the Wall St crowd..

Nov 05 08:19 PM

[Andrew Butter:]

If you take out the handout for the clunkers and the $8000 tax credit the effect of QE in USA is also about nil.

Perhaps the "resistance" is that in the current circumstances QE doesn't work

Nov 06 12:33 AM

[Moon Kil Woong:]

Because we are the global reserve currency of the world it will just take longer for the negative effects of QE to come home to roost. Already it will likely prolong our downturn and result in higher inflation when recovery finally takes hold (thus forcing higher rates sooner which dampens economic growth).

Those who are against QE tend only to be those who know about economics and realize you never get something for nothing. Those in favor of QE are those who believe in economic psychology better known as you can lie, cheat, steal, and decieve the public because they are completely daft.

Nov 06 02:57 AM

[AndrewBaker:]

QE is a big con trick. The eventual result - not apparent until the government that initiated it has long gone - will be high inflation which will destroy the value of our savings, investments, pensions, and, for those lucky enough to own one, our home (which won't be too bad as long as we continue to live in it, but will be if we want to raise cash on it).

Those responsible for QE and in those cahoots will ensure that they are protected by using various means, including selling their stocks on to us at way over value prices, taking inordinate pay rises through salary, bonus, pension contributions and other manipulations, and holding their own assets in forms where inflation proofing is the expectation.

This is one reason why stocks will fall in price soon and commodities will increase. And why most steeples will be much poorer for a very long time to come.

Nov 06 06:10 AM

[chap08:]

I am in favor of QE and take offence at your baseless characterization of me. The fact that you make such sweeping and groundless insults doesn't speak too well of you. Better stick to the facts:

QE is not monetization. It is not a way for governments to pay for excessive spending. QE is a method of influencing price inflation and economic activity when interest rates are at the lower bound. If you are not in favor of QE then, by definition, you either don't think that price inflation and economic activity should be influenced (a crazy argument where you have a central bank and fiat money supply), or you don't think interest rates can reach the lower bound (if so, just turn on the news), or you have a better method (in which case please enlighten me - and the world's central bankers).

QE is, by definition, a process that is designed to be reversed. You can hardly claim that there will never be an opportunity to reverse it, because you claim yourself that rates will be raised at some stage. If the process is not reversed, and the securities involved are government debt, then you are talking about debt monetization, not QE. I am against monetization in all but exceptional circumstances. I'm certainly against it in our present circumstances.

If you believe that QE has a role but are against monetization, then say so, as I do. If you think that governments and central banks are colluding in calling monetization QE then accuse them of that. Don't just ignorantly say that QE is equivalent with cheating and stealing.

On Nov 06 02:57 AM Moon Kil Woong wrote:

> Because we are the global reserve currency of the world it will just
> take longer for the negative effects of QE to come home to roost.
> Already it will likely prolong our downturn and result in higher
> inflation when recovery finally takes hold (thus forcing higher rates
> sooner which dampens economic growth).
>
> Those who are against QE tend only to be those who know about economics
> and realize you never get something for nothing. Those in favor of
> QE are those who believe in economic psychology better known as you
> can lie, cheat, steal, and decieve the public because they are completely
> daft.

Nov 06 07:19 AM

[Pat Shuff:]

Hoovering up the bezzle with appropriately sized jet turbine
powered suction. Expropriating the property of the haves
for showering on the have nots and antisocial engineering
programs tends to evaporate in the altitudes before
moistening the ground at the Animal Farm. When one
hears 'teabagger' fondly uttered for its undertones of
cutesie-tootsie perverted sexual act innuendo, in all
feminization fairness, the Golden Showerers are saying it.

Nov 07 06:26 AM