Thursday, 6 August 2009

Good News! More Quantitative Easing!

The Bank of England's Monetary Policy Committee is extending its Qualitative Easing (QE) by another £50 bn.

It does look as though the second part of our W shaped recession will not be so deep as the first part, but it is wise to battle it now, before it has its full effect. Good signs like rises in House prices, and expanding manufacturing and service sectors are welcome news, but not enough.

The US economy may well operate out of the recession there more readily, and so Obama was wise to hold on pumping more money into their economy when some were calling for more. America tends to be quicker, so many small businesses, stronger and more vigorous entrepreneurship.

The UK relies on trade with the world for a larger part of our economy, and the wider world will be slower to recover in most places, so we have a narrower path to tread. Part of our trade is the collapsed international finance sector.

We went into the recession with lower core inflation, which is generated in our economy by our wages and dividends rather than imported, than most countries and that continues, with wage cuts and freezes.

This remains key to our future prosperity. Tackling the National Debt is much less important, and likely to remain so.

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