Chancellor George Osborne looks set to give the green light to a second round of Quantitative Easing - a policy he once described as “an admission of failure”.
George Osborne looks set to give the green light to a second round of Quantitative Easing – a policy he described as “an admission of failure”, “a last resort” and “a leap in the dark” when implemented by Alistair Darling two years ago.
Today’s FT reports (£):
Speaking to journalists in Marseilles, the chancellor made it clear he saw no barriers to a second round of quantitative easing – creating money to pump into the economy – if a request came from the Bank, and raised no objections to the possibility of the Bank extending its purchases to assets other than gilts…
Any move to a second round of QE would require Treasury approval. Mr Osborne gave every indication he would give his assent, even for purchases of assets other than gilts…
“I have made it clear that the administrative arrangements that were established by my predecessor Alistair Darling for the operation of quantitative easing remain in place, so I don’t have to get into a discussion of how I would handle a request from the MPC,” Mr Osborne said.
This is quite a turnaround from Mr Osborne – as one can see from his reaction to Darling’s QE in early 2009; in January that year he told the Telegraph:
“Printing money is the last resort of desperate governments when all other policies have failed. It can’t be ruled out as a last resort in the fight against deflation, but in the end printing money risks losing control of inflation and all the economic problems that high inflation brings.”
“The risks with quantitative easing are either that it doesn’t work, as was the case in Japan, or as is the case with printing money in other countries, you get inflation in the future and it’s difficult to control…
“I don’t think anyone should be pleased that we’ve reached this point, it is an admission of failure, and, as I say, it carries quite a few risks…
“Anyone who tells you today that they know this is gonna, frankly doesn’t know what they’re talking about, this is a leap in the dark, and we will see whether it works.”
The FT report adds (£):
Alarm is growing in the Treasury and the coalition over the state of the economy, but Mr Osborne and his officials insist there is no need yet for a plan B on austerity.
If he can U-turn on QE, why’s he not willing to contemplate a U-turn on Plan B?Like this article? Sign up to Left Foot Forward's weekday email for the latest progressive news and comment - and support campaigning journalism by making a donation today.