Wheel Barrow Based Monetary Policy

Anatole Kaletsky, who incidentally has been telling his readers to buy shares for two years, has flipped. This morning he is calling on policy makers to Punish savers and make them spend money. He wants to tax savings.

He is not the only one, Rachel Reeves, former Bank of England economist turned Labour candidate for Leeds West, writes in the latest Fabian Review:

Print More Money
Quantitative easing, a radical policy option which was used in Japan in 2005 to end their 15 year recession, could be used now in the UK. Quantitative easing is a policy tool used when conventional monetary policy no longer works – as they nominal interest rate approaches zero. The Bank of England can either print more money or buy government and corporate debt so that long term interest rates fall. Quantitative easing is not without risks (it can push up inflation) but the potential benefits now outweigh these risks. Such a strategy is increasingly seen as a way to kick-start the economy and should be adopted.

Guido warned about the coming of Mugabinomics in November, when Gavyn Davies advocated a wheel barrow based monetary policy. What should you do in this situation? If you don’t have productive assets (such as being a business owner) exchange cash for hard assets, gold is the traditional refuge.

Sir Michael White sneered at Guido last year for telling co-conspirators to buy gold. In a period when stocks fell some 30%, sterling denominated investors who bought at the beginning of the year have seen it rise 41% from £424 to £599 an ounce today. If this year we see “quantitative easing” (printing money), holding gold will be insurance as much as an investment. The economic prospect is frightening, this isn’t about making a profit, it about holding on to what you have got…




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