Courtesy of Mish
The Bank of England may increase its bond-purchase plan by 50 billion pounds ($83 billion) today as central bankers and politicians scramble to shore up Britain’s banking system and drag the economy out of recession.
Governor Mervyn King’s nine-member Monetary Policy Committee will expand the asset-buying program to 225 billion pounds at 12 p.m. in London, the median of 48 forecasts in a Bloomberg News survey shows. That follows Prime Minister Gordon Brown’s pledge this week to spend almost 40 billion pounds in a second bailout of two the nation’s biggest banks.
Any increase in the Bank of England’s emergency program would be the third since King unveiled the plan in March. Brown’s first bank bailout, the government’s fiscal stimulus measures and an injection of 175 billion pounds in newly printed central bank money have so far failed to end Britain’s longest recession on record.
“They’ve got to throw money at it,” said Neil Mackinnon, an economist at VTB Capital Plc and a former U.K. Treasury official. “The fact of the matter is that the U.K. economy is lagging behind. As to whether quantitative easing is working, the jury is still out.”
Quantitative Easing History Lesson
Mackinnon does not know if the strategy is working yet still insists “They’ve got to throw money at it.”
Neil Mackinnon is in dire need of a history lesson. Quantitative Easing was a spectacular failure in Japan, it will prove to be a spectacular failure in the UK as well. For more on the lesson of Japan, please see Is Debt-Deflation Just Beginning?
However, this should not take a history lesson. Common sense alone says you cannot cure a debt problem by throwing still more money at problems hoping something will stick.
It is impossible to have a sustainable recovery based on loose money policies. The global housing bubble should be proof enough of that.