200 billion pounds of quantitative easing (QE) wasn’t enough according to the Bank of England’s Adam Posen.
Speaking to the Hull and Humber Chamber of Commerce, Industry, and Shipping, he argued for a second round of QE, warning that should England refuse then a lost decade of growth was ahead.
Print or die:
“Absent further monetary stimulus, I would expect UK inflation to fall well short of the target in 2012 and 2013, perhaps reinforcing a persistently low-growth outcome as in Japan in the 1990s.”
Mr Posen argued that policymakers should look past “short-term cyclical developments”. He said: “When a central bank underestimates how fast an economy can run without causing inflation, or how far away an economy is from full employment, it can cause slow growth and even recession or deflation.”
Comparing the current circumstances to Japan’s “lost decade”, he said Japan’s problems could be traced to “nascent recoveries being aborted first by macroeconomic policy mistakes, and then by the weight of financial problems” in the banking sector.
“The damage to our economy, our companies, and our workforce can be made permanent through inaction by policymakers – this is not just about getting through a bad patch, being impatient about a return to growth and employment,” Mr Posen said.
Given the massive protests against austerity measures hitting other parts of Europe right now, supporting any kind of stimulus become at least slightly more appealing to policy makers right now. Nobody wants a cement mixer in their face.