Bank of England opts for no fresh sedative after pushing UK GDP down 70% in 5 years
This headline on the BBC caught our eye today:
It came after the BoE rather predicatively left its money printing at £375bn and interest rates at 0.5%. As we’ve said many times we’ll have to wait until a least November/December time to get more money printing by the Bank of England, and more likely well into 2013.
The reason it caught our eye is because it is a statement that assumes upon itself. The assumption made by the BBC (and nearly all other mainstream media outlets for that matter) is that when the BoE prints money it has a stimulative effect on the economy.
There are plenty of people out there, ourselves included, that make the argument that the Bank of England printing money IS NOT a stimulus but rather a SEDATIVE and people are confusing price inflation with stimulus.
What is most frustrating about the above statement by the BBC is that the average reader will think that there is no debate about whether the BoE’s actions are stimulative or a sedative for the UK economy.
Not only is there a debate about whether these actions help or hinder the UK economy, because the BoE has been at the sedative game now for three plus years, we can go and look at the data and see who is winning the argument.
You don’t even need to be a data geek to realise that the statement by the BBC is at the very least questionable. Just ask yourself how long has the BoE been ‘stimulating’ the economy? Answer over 3 years. Now ask a simple follow up question ‘is the UK in recession? Answer yes. So remind us again why we assume money printing stimulates the economy?
So we’ve had all this stimulus and yet the UK is STILL in a recession. So just a cursory glance at the data and you would have to conclude that at the very least the debate on whether the BoE’s actions are a stimulus or sedative is certainly not settled.
And yet time and again it is presented in the mainstream press as if it is, and as if there is no serious debate about the issue. And isn’t being ‘right’ on this of vital importance. After-all if the sedative crowd are right then we’ve been totally screwing up our economy for more than three years.
So what happens when you drill a little further into the data?
Here is GDP in the UK since the BoE started their self-described and MSM repeated ‘stimulus’.
(click for sharper image)
You can make the argument that on a £ basis the first rounds of QE helped, but the latest round seems to have done very little.
But it should be also noted that despite throwing an eye-watering £375bn in total at the problem UK GDP is still down 4% from its ’07 highs.
And here is GDP on q/o/q basis:
(click for sharper image)
All that supposed stimulus and the UK is STILL in recession.
But the trouble with looking at GDP is that it is measured in £s and uses a very questionable GDP deflator which in our view to goose the GDP numbers higher.
So what happens when you measure UK GDP in ounces of gold? Does this look like a stimulus or a sedative to you?
(click for sharper image)
But it is when you look at the unemployment rate that it becomes very obvious that the BoE’s money printing hasn’t been a stimulus at all but rather a sedative – remember isn’t all about jobs, jobs, jobs:
(click for sharper image)
Clearly when you look at the data, especially the jobs numbers, it is at the very least reasonable to argue that the BoE’s money printing hasn’t been a stimulant but rather a sedative.
But don’t expect the MSM to recognise that there is much debate about what the BoE is actually doing and whether it is helping or harming the UK economy. No, they will just blindly go on saying that the BoE is ‘stimulating’ the economy every-time they print. Don’t be fooled.
After-all just some logical thinking will get you to question at the very least the notion that wealth can be created by some group of mandarines sat round the table at the BoE tapping numbers into a computer. If it was that easy why are any of us working?
Related posts:
- Horrible UK GDP revision all but guarantees Bank of England will print – Real GDP contracts a staggering 1.9%
- Bank of England Inflation report: Charting 5 years of abject failure
- UK manufacturing PMI plunges at second fastest pace in 20 years – so will the Bank of England print next week in response?
- Bank of England see CPI inflation falling to target by the end of next year… possibly/maybe
- Bank of England: Inflation by 2013 could be 4%… or minus 0.5% – take your pick
Link to this article: : http://www.goldmadesimplenews.com/gold/bank-of-england-opts-for-no-fresh-sedative-after-pushing-uk-gdp-down-70-in-5-years-8252/
Posted by Thomas Paterson on Oct 4 2012. Filed under Gold News.
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