Fire up the tenner machine!

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Dowload tenner.pdf and press print 10,000,000,000 times

Dowload "tenner.pdf" and press print 10,000,000,000 times

I’ve had just about enough of Tory commenters insisting that Quantitative Easing is an egregious, Mugabe-esque affront to all that is holy in our economy.

To hear them, you’d think that Alistair Darling just got “tenner.pdf” on his screen, set it to print loads and loads of copies, and started throwing them into the street.

Let’s get something straight. The type of hyperinflation in Zimbabwe, or in Gernmany or Belgium in the 1920s, is caused when governments print new money to do things like pay the salaries of government workers. Because there’s no change in the aggregate amount of goods and services in the economy, and because the natural rate of inflation isn’t changing, the value of money plummets.

Quantitative Easing refers specifically to when the economy is threatened with a deflation – and let’s remember, inflation is running at 0.1% right now, and house prices are still in a deep slump – and the central bank prints new money to buy bonds.

Get that? It’s used exclusively to purchase government gilts, or to lend to banks and other financial institutions.

Given that a) the major cause, and ongoing cause, of the present crisis is a catastrophic lack of liquidity in credit markets, and b) Conservatives get nearly as apoplectic about government debt as they do about lax monetary policy, having the government lend money to banks is surely not quite as bad as they make it sound?

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2 Responses to “Fire up the tenner machine!”

  1. voteredgogreen Says:

    …that said, perhaps the coolest thing I have ever seen (I don’t get out much) was when I went to a job interview at the Bank of England. I didn’t get the job (natch), but they paid our travel expenses in little envelopes containing perfect, crisp, untouched, virgin banknotes. Bit of class, that.

  2. peter c Says:

    government doesn’t need to print anything. these days money is no more than numbers in computer ledgers. everyone spends and accepts numbers
    if the banks can just create money/numbers out of thin air by handing out loans, so can Gollum Brown, he can just keep doing what he has always done and add on of few noughts here and there until someone numerate does the sums no hyper inflation that way, just the EU will get grumpy about how he cooks the books and so will the money markets. Gollum’s problem is that some people are good at sums and will not buy his paper and then he will have to add on more and more numbers- it’s a good scam but it can’t go on forever

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