George Osborne made some interesting comments about quantitative easing and loose monetary policy this week that showed some new thinking:
George Osborne said: “We need to offset the very necessary loose monetary policy and the distributional consequences that it is having. Essentially it makes the rich richer and makes life difficult for ordinary savers.”
“There’s a role for government policy not in stopping that monetary policy which keeps the economy strong but in mitigating its impact. I think all of us who believe in free markets need to work harder to find an answer to the anger that people clearly feel out there.”
This followed on from comments made by the Bank of England’s deputy governor Minouche Shafik that suggested quantitative easing is here to stay. New thinking at the Bank of England seems to favour QE as a permanent tool of monetary policy.
Yesterday the Bank of England announced a QE boost with another 60 billion of quantitative easing and a cut in the base rate to 0.5%. There will be no prizes for guessing who will benefit from this boost. The stock market surged by 1.5% yesterday and the trend continues today. The base rate cut will see mortgages cheaper and so stoke the London housing bubble a little more while there is stifling of the supply side.
The Federal Reserve in the United States increased interest rates yesterday and the markets responded positively. It is the first sign that the world’s economies will get back to normal. People with mortgages including the buy to let slumlords have been having an easy time, but that could be coming to an end. It seems likely the Bank of England will increase rates in 2016 too. (more…)
Last August Mark Carney governor of the Bank of England issued his ‘forward guidance’ on interest rates. He told the market that he intended to keep the Bank rate at its current historically low 0.5%, at least until the unemployment rate fell to 7% or below. Can we rely on that? (more…)
Our finances and politics are inextricably linked. The latter keeps changing and so we have to try to keep up and take political policies into account when planning for the future and deciding on investments. Politics in the US took a shift to the right this week, which is good news for rich investors, but bad news for others. (more…)
There’s a lot of speculation in the financial press about when or if interest rates will rise. The Bank of England issued ‘forward guidance’ that suggested that rates might be increased when the figure for unemployment is down to 7% and it’s close to that now. These figures are ‘seasonally adjusted, so spring could change that figure and the forward guidance is just that; guidance, not a certainty.
It’s difficult these days to even define what money is. It can be coins in our pockets, notes in purses and wallets or numbers on bank account statements. Money can be just bits in a computer or tokens of any kind.