One of the better reasoned arguments on whether “quantitative easing” is “money printing” and how important that issue might be comes in this Liam Halligan commentary at the Telegraph in which he responds to critiques of his “backwoods” way of thinking that appeared in this Standpoint magazine article by Economics Professor Tim Congdon.
Critiquing my use of the term “money-printing”, Congdon highlights that the nominal value of notes in circulation in the UK has risen only 2pc since early 2009. This is disingenuous.
Everyone arguing against QE, at least everyone serious, has been careful to describe it as the expansion of “virtual” or “electronically-created” credits ex nihilo by central banks – as I did in the very next sentence of the column from which Congdon lifted the quotation above.
Such credits are then used to buy Treasury bills from cash-strapped governments and/or bombed out debt instruments from struggling banks – who can then spend them, or not, as they wish.
So the Bank of England has created the means to spend, from nothing, despite not issuing more physical notes. To say that QE isn’t money-printing is a distinction that would make even Bill Clinton blush.
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Modern capitalism, at its core, relies on the public’s trust of fiat money and the sanctity of contract. QE is seriously undermining both those cardinal concepts. We’re not supposed to call QE “money printing” because money printing is the last refuge of declining economic empires and banana republics. It also amounts to state-sponsored theft. And against that, yes Professor Congdon, I declare an “implicit prejudice”.
There is much more here that is well worth reading, not the least of which is the assertion that “QE is a short-term expedient with friends in high places” (how can anyone argue with that?) and that QE will inevitably result in higher inflation, this already appearing in the U.K. but yet to hit the U.S. per the official government measure of consumer prices.
