Central Banks Continuing to Rewrite Economic Common Sense
Easing, by whatever name you call it, is just "printing money". This has now become a standard reaction by the majority of developed nations across the globe.
The central banks are continuing to rewrite every piece of economic common sense.
In the almost complete absence of any hard decision making by the world's politicians, the central banks are left with virtually no choice but to continually prop up debtor nations.
Poor old Ireland, who were applauded for their responsible attitude, savage cost cutting, actual salary reductions etc etc, must now be wondering why they bothered.
Economically unrealistic cheap money has failed many times in the past. Even in fairly recent history, we only have to look at Spain, Portugal, Italy, Greece and Ireland to wonder why people think that it will be any different this time.
If every country just turns on the presses then even my O-level economics brain is able to work out the hole in the plan. We will simply end up in exactly the same situation but with everything being slightly more expensive and with an even bigger pile of debt.
This may be technically good for stocks and shares
, if you managed to borrow at virtually zero to buy them, but otherwise it's not particularly helpful.
All in all, the current stream of easing comes down to kicking the can another few metres down the road.
The problem with the statements above is that nobody dares do anything different for fear of possibly creating something worse.
Unfortunately, most economies are bumbling along with baseline growth. After four years of stimulus we are pretty much hoisted on our own petard.
Many commentators, myself included, believed that the bad tasting medicine should have been taken in the first place. This would have been preferable over the continued temptation of tasty sweets that has been the only diet since the financial crisis.
Sadly, virtually every western economy is now so hooked on the sugar rush that the thought of going 'cold turkey' has become almost politically impossible.
It seems that the Japanese 'lost years' beckon for the West.
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By Simon Denham, 20 September 2012