Monday, February 16, 2009

When in a hole ...

Once again we approach the cataclysm that is quantitative easing, otherwise known as printing money (but without the direct investment of a Keynesian type approach).

The whole approach of reducing interest rates led to savers having less money to spend whilst those in serious debt just tried to hang on. The net effect might be to slow the creeping expansion of toxic debt (good for banks), reduce currency value and cause an influx of cheap foreign capital (good for stock market and house owners but bad for inflation) but this is at the cost of shrinking and weakening our overall economy (bad for people).

A large number of souls are out of work for no particularly good reason. With inflation running at 3.1%, we need to be restoring confidence to our savers and our currency. Printing more money through such a scheme will either cause an exodus that'll lead us into a tailspin or more likely drag out the recession for many years.

Despite beliefs that we can dig our way out of this mess by applying the same sort of techniques which got us here in the first place, we just seem to be getting in deeper.

By the way, if the banks have so many toxic assets they would like to get rid of, can't they at the very least pay bonuses in them?