The Bank of England goes beyond madness and prints up another £50bn – gold price rises
Well just like we predicted last week and again this week the Bank of England is desperate to make sure that it remains the biggest money printer in the world – can’t let the ECB upstage us now can we.
From the release:
At its meeting today, the Monetary Policy Committee judged that, in order to keep inflation on track to meet the 2% inflation target over the medium term, its programme of asset purchases should be increased by £50 billion to a total of £325 billion. That would take the scale of the Committee’s asset purchase programme financed by the issuance of central bank reserves above the £275 billion authorised in your letter of 6 October 2011.
In the United Kingdom, the underlying pace of recovery slowed during 2011, with activity falling slightly during the final quarter. Some recent business surveys have painted a more positive picture and asset prices have risen. But the pace of expansion in the United Kingdom’s main export markets has also slowed and concerns remain about the indebtedness and competitiveness of some euro-area countries. A gradual strengthening of output growth later this year should be supported by a gentle recovery in household real incomes as inflation falls, together with the continued stimulus from monetary policy. But the drag from tight credit conditions and the fiscal consolidation together present a headwind. The correspondingly weak outlook for near-term output growth means that a significant margin of economic slack is likely to persist.
CPI inflation has fallen back from its September peak, declining to 4.2% in December. Inflation should continue to fall sharply in the near term, as the increase in VAT in January 2011 drops out of the twelve-month comparison. Inflation is then likely to decline further as the contribution of energy and import prices diminishes, while downward pressure from unemployment and spare capacity continues to restrain domestically generated inflation.
In the light of its most recent economic projections, the Committee judged that the weak near-term growth outlook and associated downward pressure from economic slack meant that, without further monetary stimulus, it was more likely than not that inflation would undershoot the 2% target in the medium term.
[emphasis ours]
So for those trying to keep scores the BoE has now taken its money printing limit to £325bn. However, we’re quite sure it won’t end there and by the end of 2012 the combined balance sheet of the BoE could be as high as £530bn – that would represent a staggering 40% of UK GDP.
For an in depth look at what all this money printing means for the price of gold in the UK read this:
Let’s just quickly remind ourselves what Osborne and Cameron both have said about money printing before they got into office:
As Mr Cameron said: “Sometime soon that [QE] will have to stop, because in the end, printing money leads to inflation.”
[emphasis ours]
Read 14 more quotes from the QE-bashing duo (before they took office of course) here.
So let’s take a look at what Osborne said today about all this massive money printing:
‘Monetary policy continues to have a critical role in supporting the economy as the government delivers on its commitment to fiscal consolidation and it remains the primary tool for responding to changes in the economic outlook,’
Ah, how quickly they change their opinions.
Sadly as we’ve being saying since our very first post the money printing will not stop – in fact it hasn’t just re-started it is now accelerating. This is very slippery path we’re now on and there is absolutely no desire to by the government of the BoE to change direction – instead they’ve just put their foot on the gas.
Oh, and let’s not forget that the BoE is still producing 100% more inflation than the government has mandated they do. Sure we may see the CPI tick down for the next couple of months but any idea that we’ll be close to 2% by the end of the year is beyond madness.
How can we be so sure? Because the BoE has ditched the 2% target and is actively seeking CPI in the 4-7% range (that’s what the money printing is telling you loud and clear). This is how all governments pay off debt – with funny money – when the grand debt cycle comes to an end.
For those of you who still have confidence in the BoE and its desire to reach 2% CPI inflation then you might want to see how their track record has been in the past at predicting future CPI inflation (hint – its not good).
No prizes for guessing which way gold moved today – it was up 1% and is holding around the £1105 level:
(click for sharper image)
It’s really not that complicated – printing money is simply raw inflation and will inevitably take its toll on the Pound.
This potentially will lead to a massive devaluation of the Pound that will simply take you breath away – and maybe as soon as the end of this year.
Related posts:
- The Bank of England prints money and declares: We are all gingers now
- Bank of England see CPI inflation falling to target by the end of next year… possibly/maybe
- Bank of England maintains 0.5% interest rates – Gold price holds steady on the news
- UK production contracts 1.7% – Bank of England to print more money early in the New Year?
- David Blanchflower says the Bank of England will print more money before November
Link to this article: : http://www.goldmadesimplenews.com/gold/the-bank-of-england-goes-beyond-madness-and-prints-up-another-50bn-gold-price-rises-6139/
Posted by Thomas Paterson on Feb 9 2012. Filed under Analysis, Gold News, Markets.
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