Friday, 7 October 2011
Once you pop you just can't stop...QE2
We estimated it would get to £300 billion when the first tranche was announced and here we are at £275 billion and counting.
Hands up who thinks this will be the last amount?
Andrew Sentance has it right too today. The biggest problem in the Coutnry is the lack of consumer demand, this is being hammered by inflation at 4.5% - who has the money to get by anymore? I certainly don't have anything to spare for luxuries and I am sure that is no different to anyone else.
Even by the Bank of England's own analysis, last time QE added above 1% to inflation, so this bout will add at least 0.5% to an inflation rate already set to go over 5% before the year end. This is many ways is some quite staggering risk taking by the Bank of England.
Clearly to me they must be expecting a major Euro bust to think that the UK needs such radical treatment - would it really be the end of the world to have the economy flatline again for a quarter or two?
From a share trading perspective this is good news; but also good news for the holders of Gold. So for that us investors should be a little happy.
On the other hand in the long-term unwinding these positions is going to be very fraught and deflationary - just as the economy recovers? Well into the recovery? Sometime in the 2020's? Who knows what the side effects are either?