Bank of England Ignites Quantitative Inflation

Dandelion Salad

By Nadeem Walayat
The Market Oracle
2009 Mar 05, 2009 – 04:30 PM

Economic Shock and Awe as Interest Rates are cut to 0.5% coupled with £75 Billion conjured out of thin air by Mervyn King Waving his “Central Bank Magic Wand”. The government through what should be more accurately termed as “Quantitative Inflation” than “Quantative Easing” sanctioned £75 billion in the initial print run which will have a multiplier effect through fractional reserve banking and leverage of anywhere from between X10 to X20 the amount depending on how it filters through the economy, therefore £75 billion increase in the money supply implies the supply of credit should jump by anywhere between £750 billion to £1.5 trillion, but more probably in the region of X10 at £750 billion over the next few months, with expectations of several more doses of “Quantitative Inflation” during 2009 that seeks to devalue the British Pound towards parity to the U.S. Dollar.

UK Interest Rates

Frankly interest rates being cut from 1% to 0.5% makes little if no positive difference to the economy as the problem is the lack of credit and not the level of the base interest rate, if anything it further reinforces the fact that Monetary Policy has Failed, therefore the government may have been wiser to have left interest rates at 1% which would have sent a stronger message out to financial markets rather than look here. We have panicked again and cut to 0.5% ! 0.25% Next, then what ? The end of monetary policy that’s what! I would be surprised if rates were cut again, but with the lack of competent decision making I am afraid it remains a distinct possibility.


via Bank of England Ignites Quantitative Inflation :: The Market Oracle

h/t: Global Research


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2 thoughts on “Bank of England Ignites Quantitative Inflation

  1. Pingback: “Outlaw the Shadow Banking System!” Guess Who Said It? by Matthias Chang « Dandelion Salad

  2. The major fallacy in this article is that there is a lack of credit. A glut of credit is what created the problem. The illogic of the situation is that the people who created the situation are trying to solve the problem they created by applying more of the same failed policies..

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