Quantative Easing

[Cyberman]

Incompetance from your point of view, but from other people's point of view Labour have been really great. Did you consider that?

IMO we need to look at whether we're on the right track when we're happy to pay the likes of Jonathan Ross £6m/year when nuclear physists on £1m/year would be better use of public money.

If going to the IMF is viewed as a success by anybody in the country I despair. It's like saying a guy that crashes his car at 150mph and kills 20 people is a good driver !!

[M_B]

Everyone on this board says QE is inevitably going to lead to runaway inflation like happened in Germany and Zimbabwe.

I tend to agree. However QE didn't cause inflation in Japan so its not inevitable.

[PM-Junkie]

He has access to, one would expect, a whole team of well-renouned economists, so in that sense he has as much knowledge as he needs.

And, I didn't claim you or others here don't understand economics... only that the government has people who understand them too. I was asking if QE was really as cut and dried a failure as people here like to think. As Gonzo points out there are people here who think it IS worthwhile so I think my question is answered, no thanks to you. You seem very touchy on the whole subject... maybe you should change your signature so everyone can read about how great and wise you are, if you're not feeling enough respect from the community.

Oh, so now your position changes from one of "he is highly educated in economics" to "he has people around him who are highly educated in economics".

Exactly my point. You who do not have the facts, swallow what you are told by the media because you can't be bothered to find out the facts for yourself, and then lay into anyone who has an opinion that differs from yours or who thinks the government are abut to light the blue touch paper (if they haven't already).

As for the claim that any politician in power will do what he thinks best for the nation - how much more evidence do you need that that is palpable nonsense? Over the last 30-40 years just about every PM has done whatever it takes to retain power - that is what it is all about, politics not economics. The game is to have the economy performing at its best over the end of a five year cycle so that they are in the best light when gullible idiots get to put a tick in the box. So anything measure that doesn't positively affect that 5 year cycle is going to struggle to be implemented - and that is one of the reasons we are in the mess we are in.

There is abundant evidence that Brown does not take advice from anyone and often does what he thinks best even when all those around him advise another course of action. He is not the only PM who has behaved like that, Tory and labour...it seems to be a pattern. I do find it quite remarkable though that supposedly educated people can just keep accepting the spin they are fed by politicians that they are doing things for the good of all despite overwhelming evidence to the contrary.

As for QE, again, you will find very few economists who disagree that QE results in devaluing the currency, followed by higher inflation and interest rates in the medium term to longer term...depending on the extent of the QE measures taken. That is a fact. You can argue, and indeed there is considerable debate, that devaluing a currency in the wake of a global downturn is a good thing because, for example, it strengthens the position of exporters. However as Germany is finding, in the event of a global downturn, who exactly do you export to? So that potential benefit is probably a short term thing, while those companies who are still interested in strengthening their inventories take advantage of cheap supplies.

As for interest rates and inflation, higher values in either or both exerts downward macro-economic pressure. In the medium term to longer term, this makes it far more likely that a recession is W shaped rather than U shaped...and for that reason inflationary pressures should always be kept as low as possible during a recession so that the exit from the recession is as smooth and as quick as possible. Measures taken should always be with that fact in mind since the second half of a recession can be far more damaging than the first.

So, as you have done, you have to ask yourself why any politician would do something that goes against that, is clearly risky, clearly increases inflationary pressure, and clearly risks falling back into a downturn after a short recovery.

To answer that, I put it to you that it has EVERYTHING to do with the fact that there will be an election sometime in the next 12-14 months, and NOTHING to do with economics. In my opinion, the evidence is clear - these people will do anything to get elected (remember, when it was clear from the polls that a labour party lead by Brown wouldn't win the last election, they spun the yarn about Blair promising to serve a full term. Another lie just to keep power...so it's not as if they don't have a history). And as for dealing with the economic turmoil if the ploy succeeds and they do keep power, as they have repeatedly done in the past they will just blame someone else for it.

And no, I don't think the mentality of the Tory party is any different - the first past the post system of electing government encourages it.

So instead of "I'm sure Brown knows what he's doing", try debating your position and showing me how wrong I am. There are enough people here who agree with you - I'd love to be persuaded.

[BrilloPad]

Over the last 30-40 years just about every PM has done whatever it takes to retain power

Except Maggie

[OwlHoot]

... I put it to you that it has EVERYTHING to do with the fact that there will be an election sometime in the next 12-14 months, and NOTHING to do with economics...

WHS

[PM-Junkie]

Except Maggie

You could argue the opposite...the imposition of the poll tax in 1989 was timed so it wouldn't impact the results of the 1998 general election election. And you could also argue that it was imposed in Scotland first and delayed in England so it wouldn't impact the 1991 local elections in England.

Cynical? ME??

[Sysman]

You could argue the opposite...the imposition of the poll tax in 1989 was timed so it wouldn't impact the results of the 1998 general election election. And you could also argue that it was imposed in Scotland first and delayed in England so it wouldn't impact the 1991 local elections in England.

Cynical? ME??

The Falklands war too. Her popularity prior to that was plummeting.

[d000hg]

...

I don't have any arguments to make right now but wanted to thank you for taking the time to explain rather than lambast.

[d000hg]

You don't need models. An element of commonsense is what has been needed but that has been decidedly lacking. Letting borrowing get out of control, letting taxes get out of control, letting spending get out of control, etc etc etc,,,,,, all avoidable and all down to Gordon Brown !!

I don't know if common sense is correct, isn't the system more complicated than that when you take into account all the various nations and the interplay of interest rates, currencies, etc? With so many different ways that money exists (e.g shares, gilts, commodities, etc) aren't some aspects of world economy going to be counterintuitive in the same kind of way that some parts of physics are - another subject which is intuitive at a large scale but totally weird when you examine it in detail?

I don't for a second claim computers can model everything due to the human factor, in the same way we can't possibly model the weather systems in any detail... but compared to what we had 50 years ago can't we at least make some useful predictions about what changing interest rates or printing money will do? Or are you saying they simply have rules of thumb "I dunno, reducing interest rates does X, 1.5% sounds about right to me"?

[BrilloPad]

I don't know if common sense is correct, isn't the system more complicated than that when you take into account all the various nations and the interplay of interest rates, currencies, etc? With so many different ways that money exists (e.g shares, gilts, commodities, etc) aren't some aspects of world economy going to be counterintuitive in the same kind of way that some parts of physics are - another subject which is intuitive at a large scale but totally weird when you examine it in detail?

I don't for a second claim computers can model everything due to the human factor, in the same way we can't possibly model the weather systems in any detail... but compared to what we had 50 years ago can't we at least make some useful predictions about what changing interest rates or printing money will do? Or are you saying they simply have rules of thumb "I dunno, reducing interest rates does X, 1.5% sounds about right to me"?

I think its more a (dark) art than science. And quite alot is down to pyschology and how people will behave.

e.g. in 70s inflation 25% so people should spend money as no point in saving. but they saved more to compensate.

Alot of the points SG makes are very valid : e.g. most people dont understand basic probability. So with a run of 20 coin tosses : what is probability of 5 consecutive (heads or tails)? Most guess very low : in fact it is about a quarter.