Print Story Partial Vindication
By Breaker (Fri Mar 13, 2009 at 06:46:13 AM EST) (all tags)
From that noted right wing source, The Grauniad.

Weak pound, weak government.  DOOOOOOOOOOOOOMED!

I await your grovelling apologies.

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Partial Vindication | 16 comments (16 topical, 0 hidden)
That's not the real crisis! by me0w (4.00 / 3) #1 Fri Mar 13, 2009 at 06:58:10 AM EST
Who will think of the plight of the Sausage Pony?

I can provide by Phage (4.00 / 1) #2 Fri Mar 13, 2009 at 07:02:11 AM EST
a complete abject grovelling experience for the price of a pint of beer.

Better get in now before you don't have any evenings at all !

Can probably squeeze a cheeky few by Breaker (2.00 / 0) #7 Fri Mar 13, 2009 at 08:55:18 AM EST
In next week, but no more than 3 in a session this side of D-day though.

[ Parent ]
See by R Mutt (4.00 / 1) #3 Fri Mar 13, 2009 at 07:13:00 AM EST
Stumbling and Mumbling's take:
This puzzles me. If sterling’s really fall is telling us that there’s a risk of inflation, then it should have been accompanied by a rise in the breakeven inflation rate (the gap between conventional and index-linked gilt yields). But my chart shows that the opposite has happened. As the pound has fallen, investors have become less worried by inflation, not more.
But yes, no-one is disputing that Quantitative Easing carries a risk of inflation, which would also devalue the currency. That's the cost. The questions are:
1. What is the risk?
2. Do the benefits outweigh the costs of that risk?

As has been said here before, it's essentially the same cost/benefit as with a fiscal stimulus like the US is pursuing.

The benefit in both cases is an immediate boost to the economy.

The cost of a fiscal stimulus is: future taxes, which will raise the cost of living and doing business in the future.

The cost of quantitative easing, if it leads to inflation, is higher interest rates to control that inflation. Which means paying more money on mortgages, TV-loans, factory-building etc loans. Which ultimately comes down to the same thing: it raises the cost of living and doing business in the future.

It seems to me that the debate has entered a kind of boring technocratic phase. The only way you can analyse the costs and benefits of Quantitative Easing versus Fiscal Stimulus versus Doing Nothing is to plug numbers into massively complicated macroeconomic models and see what comes out. And that's not really something amateur bloviators like us can do.

Mmmmm - bloviators by Phage (4.00 / 1) #4 Fri Mar 13, 2009 at 07:16:30 AM EST
Cry HAVOC and let slip the bloviators...
Atomic batteries to power, bloviators to speed...

[ Parent ]
S&M fails to convince me. by Breaker (4.00 / 0) #6 Fri Mar 13, 2009 at 08:53:10 AM EST
The Govt's "do-anything-to-be-seen-not-doing-nothing" approach so far has tipped a vast wedge of cash into the banks with no seeming end or positive effect.

Accordingly, Sterling is dropping in value as foreign investors sell out of the pound and walk away with taxpayer's money.

[ Parent ]
Yes and no by R Mutt (4.00 / 1) #10 Fri Mar 13, 2009 at 10:14:49 AM EST
I think the bank bailout is really a different issue to the economic stimulus. If you remember, I opposed the bank bailout from the start, on the grounds of moral hazard and the cost to the taxpayer.

However, I don't think allowing the banks to fail as I wanted would have made Sterling any higher. According to the linked article, the decline of Sterling is due to fear of instability in the UK, and a preference shift away from financial services. If true, letting the UK's banks fail would have surely have exacerbated both those factors, making Sterling even lower than it is today. The benefits of the Do Nothing option lie in the future: we'd be less fucked in 2014, but more fucked now.

[ Parent ]
Wrong argument. by Breaker (4.00 / 0) #12 Fri Mar 13, 2009 at 10:43:15 AM EST
Previously I argued that the Government was taking steps that devalued the pound and this would be a Bad Thing.

The link in the diary bears that out; this is the limit I claim vindication, with the caveat that this isn't from one of the "right wing conspiracy" sites.

[ Parent ]
Well, maybe I misunderstood by R Mutt (4.00 / 1) #14 Tue Mar 17, 2009 at 04:40:12 AM EST
But when you said "tipped a vast wedge of cash into the banks" I assumed you meant the bank bailout. That's a different issue to Quantitative Easing/Fiscal Stimulus, which is aimed at the wider economy not the banks. But the report doesn't say anything about the bank bailout.

Now there are basically four possible opinions:

A. The City opinion: bail out the banks, fuck everyone else.
B. My opinion: fuck the banks, bail out everyone else.
C. Gordon Brown's opinion: bail out the banks, bail out everyone else.
D. Your opinion: fuck everybody.

But if the report's right and the fall in Sterling is due to "confidence", I think option D would have left Sterling as bad or worse than it is right now. I suspect the report authors would prefer option A, though they don't say so explicitly.

[ Parent ]
I think you'll find by Breaker (2.00 / 0) #15 Tue Mar 17, 2009 at 06:52:44 AM EST
D. should read "fuck the banks, bail out what we can afford and need to, batten down the hatches for everything else".

[ Parent ]
I'm, erm, on my knees by nebbish (4.00 / 2) #5 Fri Mar 13, 2009 at 08:06:49 AM EST
But I'll wait until something's actually happened, rather than read yet another economist's predictions when they've done so brilliantly in the past, before I, erm, go any further.

It's political correctness gone mad!

It is happening. by Breaker (4.00 / 0) #8 Fri Mar 13, 2009 at 08:56:31 AM EST
GBP is dropping like a stone.

Food prices are increasing as we import so much of our daily bread.  Unemployment - going up.

What signs are you awaiting?  Plague and pestilence?

[ Parent ]
Look at the article again by nebbish (4.00 / 1) #13 Mon Mar 16, 2009 at 05:41:14 PM EST
Intro copy: "The authorities seem dangerously blasé about the potential damage of a declining currency"

It's a speculative article through and through.

It's political correctness gone mad!

[ Parent ]
but it agrees with breaker by garlic (2.00 / 0) #16 Tue Mar 17, 2009 at 09:01:31 AM EST
that must mean he was right!

[ Parent ]
Well by gpig (2.00 / 0) #9 Fri Mar 13, 2009 at 09:45:56 AM EST
The pound was already overvalued against the dollar, $1.40 is low but not desperately bad (I remember there being parity some time around the mid-80s so it's been worse). The exchange rate with the euro is worrying though -- we should really have joined while things were more favourable.
(,   ,') -- eep
Euro by Breaker (4.00 / 0) #11 Fri Mar 13, 2009 at 10:41:05 AM EST
Have a chat with Ireland, Portugal and Spain about how great that's working out for them right now, eh?

[ Parent ]
Partial Vindication | 16 comments (16 topical, 0 hidden)