Saturday, 7 March 2009

Quantitative Easing – The con is on

So it’s come to this. What is Quantitative Easing? Well, the Bank of England will buy government and corporate bonds from commercial banks, and pay for them by increasing the value of the reserves that they hold bla bla bla bla.

Let me tell you something.

It’s printing money, is what it is. It’s Tommy Coopernomics. Conjuring money out of thin air. And if that was an easy solution to financial crises, Zimbabwe would be the richest country in the world. Just like that.

There can only be one consequence of printing money, prices will be pushed higher than they otherwise would be if the new money had not been created.

What this does is, it transfers resources to those who receive the funny money first (oh, that would be the banks by the way, is that ok?) from the people who get to spend it last, when it’s too late, because prices by then have risen proportionately to cancel out the benefit of the extra cash. Who are those people? The humble proles of course, the PAYE slaves and former slaves living off their (now devalued) pensions.

Let me make it clearer. Imagine if, right now, the government announced a new policy to avert the depression: that they were going to increase income tax, and the extra revenue would be given to the banks, as a free gift, for them to lend out as they saw fit. There would be uproar! But the net effect of QE is the same.

So what on earth are they playing at, and how do they think they can get away with it?

Well, if they think the general public won’t see that the policy is printing money, the media has put paid to that, with just about every newspaper headline reading something like “Government begins quantitative easing, or ‘printing money’”. No, their inflationary free money giveaway policy will be hidden behind falling or stable prices.

If that sounds like a nonsensical statement, allow me to explain. Let’s say the governments preferred inflation measure, the CPI, goes negative (it’s still above target at the time of writing incidentally, a fact not pointed out often enough in a media talking as if the CPI has gone negative already). This, apparently, would be terrible. Imagine, things are getting cheaper. How awful! (Don’t get me started on this one, we’ll come back to this in another post!). OK. So, they print money. Instead the price level changes year on year by +2%. Hurray! Bank has hit its inflation target! But hey, what if prices as measured by the CPI would have fallen by 2% (i. e. a negative CPI), if QE hadn’t been undertaken?

Well, anyone with savings or unable to negotiate a pay rise, just lost out by 4%, all the while the Bank of England would be saying they got things back on track with 2% inflation.
So why do they hate savers and people who can’t get a pay rise?

Short answer.

The governing elites are a bunch of cunts.

Long answer, look out for my next post about falling prices (currently being wrongly referred to as “deflation” in the media).

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