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.”
And in March ’09 he told BBC News that:
“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?
13 Responses to “Osborne set to U-turn on QE – so why not on Plan B?”
Vincenzo Rampulla
A key Qs that prob won't get answered: @leftfootfwd: Osborne set to U-turn on QE – so why not on Plan B? http://t.co/Z0aZzUl by @ShamikDas
Laughing Gravy
OK but what exactly is Plan B? I presume it is some kind of Keynesian stimulus, but there is an amazing lack of detail in this post as there is in many other posts advocating this mythical plan.
Selohesra
What I didn’t follow from the article was do you support Osbourne if he does indeed go for QE2 or are you just sticking at the schoolboy debating level of trying to spot inconsistencies in your opponent rather than advance a coherent argument of your own?
Mr. Sensible
Plan A isn’t exactly working, so how can Osborne credibly stick to that?
Shamik Das
Now @EdBallsMP quotes Osborne's dissing of QE in 09 – watch vid of GO calling it "last resort of desperate governments" http://t.co/05iA9VEW