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May 08, 2009

Comments

kinglear

Bang on. The QE set up has no effect on the "real" market for borrowing - whatever that is nowadays.
Whether it'll work or not is another matter. The lady bank teller I was speaking to yesterday said people were beginning to ease up a bit - they'd got through 6 months, and felt if it didn't get any worse they could cope. IF it didn't get any worse...

Alice Cook

Stumbling,

This is nonsense:

"you can’t complain both about this and about the government crowding out the corporate sector. If the Bank of England were to buy all the gilts issued this year, the government wouldn’t have to tap the private sector for cash at all, leaving it free to fund companies."

If the BoE bought all the government debt stock, they would inject a huge amount of liquidity. That would feed into higher inflation, fueling uncertainty about the real rate of interest, which would in turn generate a higher risk premium for firms.

This would lead to crowding out, and lower economic growth.

Alice Cook

http://ukhousebubble.blogspot.com

chris

@ Alice - I agree, if inflation rises, it's quite possible that firms would find it harder to borrow, ceteris paribus. But this is not the claim Fraser is making; he's arguing that crowding out is happening now.
Nor, I think, could he make the claim. Yes, inflation expectations have risen since QE began - as the BoE wants - but they are still lower than they were last autumn. Breakeven inflation rates of under 3% are not a cause of companies' difficulties.

kinglear

Chris - Guardian's scoop about BofE worries about the other shoe dropping and the increase of another £50billion of QE seem to suggest that whatever else is happening, businesses are NOT getting the money they need and there is at least another horrible set or two of bank figures. There are lots of stories of overseas banks NOT rolling over loans, but just taking their money home.THAT could be really really nasty, a la Iceland.

john problem

Well, it's all very well, this high-faluting stuff about quantitative easing and such (curious how banking phrases parallel the digestive system.) But if you're staggering along on an old age pension of £90 per week (lowest in Europe), wondering if you can afford another smoke,it don't mean a thing. Nobody has yet got any forecast about the financial future that makes sense. Mrs. Jones down my street says that it'll all come out alright in the end as it always does, dear. "Fraser Nelson," she says, "Fraser Nelson! I used to do his cleaning and he didn't have a single book on economics - all Dandy and Beano." She's probably just as well informed on what's a-coming down as our esteemed Chancellor and his greasy boss - probably more so.

Kit Collis

Thank you for clearing that up. That is the kind of thing that, if I were to read it, would conflict with my rudimentary understanding and leave me feeling confused as to whether I am right. The piece that you refer to is terrible.

kinglear

Fraser probably learned more about economics and human behaviour from the Dandy and the Beano than any of us have from economics textbooks.
Even if he can't remember it....

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