Friday, 6 March 2009

Quatitative Easing today Robert Mugabe tomorrow

Well its official. We are going to print money to solve our problems just like the worst third world dictators do to hang on to power. How can it be right that we try to get out of a mess caused by too much borrowing and cheap money by making money even cheaper in greater quantities. How can it be right to brutally penalise savers and reward the profligates who got us into this mess. It is insane. The emperor has no clothes!

I predict Q. E. is one thing the ECB will never do. The Germans will simply never agree and they will be right. It would amount to an EU debt union.

Under QE Sterling will weaken, the Euro will strengthen, UK inflation will rocket, labour unrest will follow and we will be back to the last days of the Callaghan government in 1978/79. It took the bravest political decision of my lifetime by Mrs Thatcher in the 81 budget to raise taxes in a recession to cut the government fiscal deficit. Remember 364 academic economists, the great and the good of the economic world signed a letter to the Times saying this was completely the wrong action to take. Time proved it was the basis for the UK economic recovery but even 20 years later many of these economists cannot accept they were wrong and Mrs Thatcher was right. They behaved like 364 Ted Heaths. Cameron will have neither the courage or the will to take similar unpopular action when he comes to power.

Barclays Capital witter on about the Taylor rule indicating rates should be "minus 1%". This is a classic case of extrapolating into the unknown a rule whose veracity has only ever been tested over a small range of much replicated circumstances.

UKIP should oppose this QE tooth and nail as when it fails, as it will, the clamour to join the Euro run properly by the Germans will be irrestible. We are now in the end game for Sterling.

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