Guido is keen that we end Quantitative Easing today. Rightly, he points out that is is impossible to tell if it has really done anything. I can see a recovery in the stock market and a Government able to spend as a result, so it has done something. Whether those two things are worth £200 billion is another story.
Here I am torn becuase personally I saw QE was going to put the market on rocket fuel and invested accordingly. Taking a wider view, removing £200 billion of future spend to help the election today is pure theft and a con on the public who do not understand the trick. That the Tories do not explain what is being done is shameful.
Without QE demand may have fallen further, but with a floating currency the UK could have gotten through with a lower value Pound. With the end of QE it seems as if the pound will fall further in any event; Perhaps it was all for nothing?
Finally, John Redwood, the most sound Tory on economic policy, agrees with Guido that the threat now is inflation. I don't see it myself, inflation is a backwards looking indicator not a forward one. There is too much unemployment for wages to be pushed up, Government spending is going to fall, VAT tax rises are netural because they put up the price of goods but they reduce demand, income tax rises reduce demand. The one factor pushing inflation is the fall of the Pound - unless that is catastrophic we are not going to have inflation over 3% or 4% for years. We won't have the GDP growth either, sadly, instead it looks more like a Jpan style form of low level stagflation as compared to the 1970's. The effect is the same though unfortunately.
End QE, but not becuase of inflation, but becuase there is little evidence it has revived the private sector or achieved much apart formget us further into debt and call our Soverieng rating into question - it has only succeeded in propping up our discredited Government.