QE is not working, we have tried this now for several years, since 2010. Every time the UK tries it the effect gets less and less - the law of diminishing returns.
Worse the more we continue the
more likely people will realise the fallacy of pretend money printed to
help the Government keep the deficit rising. There is no plan for
paying back QE. I have asked several of the leading economists in the
City in recent days and all are baffled by the answer. Some say it will
be run off, others that it will be monetised. Not one of them seriously
believes the bank will put it back to into the market - demand would
crash and rates spike.
So the more we do, the more
difficulty we are getting into. Worse now, is that the effect is so
weak, yes the stock market is stronger and the banks are fully zombified
without breaking. But the economy is flat. No new companies are coming
in to take out the heavily indebted and so spark a wave of
consolidation. The banks roll over loans they know cannot be repaid in
If we raised rates, the situation would
change, savers would get a return, as would investors. More normal
market disciplines would return - maybe even the banks would be forced
to write off more loans and de-zombify the economy.
pain would be worth the gain, of course, as it would stall house price
inflation and favour exports over imports, no Government is going to
want to do this. But surely this is the sensible option, going back to
normality and away from fantasy? instead we have prediciotns of 3 more
years of ultra-low interest rates; and so 3 more years at least of
grindin nothingness for the UK economy. My only hope is the notes of the Bank of England meetings show that at least a new way is being discussed, even if only by a minority.