QE does not increase public debt – it simply involves exchanging one form of debt (gilts) for another (cash). Indeed, the latter is a very theoretical debt: try going along to the Bank of England and demand £20 of gold or anything else for your £20 note – you wont get it. Thus QE, if anything, REDUCES public debt.

In contrast, traditional Keynsian borrow and spend involves governments going into debt, but there ABSOLUTLY NO REASON why governments have to go for this (in my view) questionable way of boosting the economy.

Far simpler would be to do some genuine money printing, i.e. have government spending exceed income from tax and borrowing. There are plenty of reputable economists who advocate this. E.g. see my site (http://printingmoneyisgood.blogspot.com/ ) and see list on left hand side entitled “Other articles which advocate money printing.” Another economist who goes along with the latter idea (if I understand him correctly) is Warren Mosler.

Reply: Have you not seen the huge surge in public borrowing from the deficit and the bank strategy?

One lesson I have learned from watching international bankers is that they are happy to carry on financing an idiot until all his assets are pledged as collateral and debts/losses have grown to match the pledge. When it is clear that they are dealing with an idiot, they will stop hedging trades with him and make some money trading against him, meanwhile selling off his debts to others. The collateral is then scooped up to cover the losses, and lending ceases. This technique is applied equally to hedge funds, industrial companies or nation states, all of whom can be idiots.

If the US can’t raise enough cash for its short term needs what hope has the UK.

How would the UK deal with a 40% funding gap – at the same time as plummeting tax revenues?

Any thoughts Mr Redwood?

Why bother raising income tax (proceeds expected this year: £155 billion) when you can just print the stuff like this?

I think we do need to begin to understand that this QE is designed to finance the government deficit and not to stimulate the economy. GB and his crew really, REALLY are Socialists and not “nice New Labourites”.

There are other ways of Bringing a nation and its people to their Knees.

http://www.youtube.com/user/campaignforliberty

John Redwood, Conservative MP for Workingham, yesterday (Wednesday) predicted that the Bank of England would embark upon another phase of quantitative easing. This was counter to the prevailing wisdom. Today on the BBC Radio 4 programme, “The World at One”, we learned that MR. Redwood’s prediction proved correct, and they further reported it was indeed a surprise to most pundits. In their analysis they quizzed the Treasury representative as to why the Chancellor had given his approval, where as if Mr Redwood had been asking the questions it seems likely he would have wanted to know why the Treasury had prompted the Bank’s action.

Whenever I hear or read the phrase ‘quantative easing’ I recall Harold Wilson’s assurances that ‘the pound in your pocket’ would not suffer. Our problem today is not devaluation because that has already happened but that once the US and others begin to come out of recession they will be reversing their financial stimuli. If, when that happens there is no perceivable sign that public expenditure is being scaled back to reduce the colossal debts we are presently racking up, the financial markets will surely punish Sterling.

There is no alternative to addressing public expenditure. Unlike 1977 for example we do not have the prospect of massive new wealth as was then the case with North Sea oil waiting in the wings to bail us out.