The ludicrous thing was that Britain had a AAA rating in the first place.
It is four years since I started pointing out the blindlingly obvious, that quantitive easing would cause inflation and devaluation. Four years ago this blog had far fewer readers than it does now, and I am quite proud of that piece, so do read it.
At the time it was a deeply unfashionable view – in part because it was New Labour doing it, so all the BBC and Guardianista media were backing quantitive easing. Even when I wrote this two years ago:
Inflation as measured by the retail price index remains stubbornly at 5.2%, despite all the obvious deflationary pressures on the economy and continuing weak consumer demand. Strangely, the attempts to explain this being offered by media pundits all miss out quantitive easing, or to use a more old-fashioned term, printing money.
It is deeply unfashionable to hold to the view that simply to create more money reduces the value of the money already in circulation in relation to the supply of available goods; but that is what all history tells us (the benchmark example being the rampant inflation after Spanish opening up of the New World greatly increased the amount of gold coinage in circulation). Common sense tells us that too. Otherwise we could simply solve many of our problems by printing another couple of trillion pounds.
A couple of years ago, I suggested “Enough quantitive easing and we can eventually get back to stagflation”. We are just about there. Why have none of the experts noticed?
nobody much agreed.
Fashion in economics is fascinating. Now every financial pundit on the BBC and Sky has noticed that quantitive easing causes devaluation and inflation. Suddenly they have remembered that if you create a lot of something, it decreases its unit value.
Hey, but the banks have the money that was created, and bank bonuses are back to normal. So all is fine.