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I am not sure which is more hapless and hopeless, the ECB or the Bank of England. It is a close run thing and today’s actions by the pair did nothing to clarify the situation.
The Bank of England announced £50 billion more Quantitative Easing. Ok, so QE has not worked to date so let’s try it again but only a small dose. If you think that QE is the answer to the UK’s ills (and for what it is worth I do not) then force the patient to drink gallons of medicine. The strategy seems to be a big gulp, then another big gulp and because that has not worked another sip or two. This latest QE will be regarded as either: another dollop of the wrong medicine (by sceptics like myself) or too little medicine to make a change and thus a counterproductive confidence destroyer (that is the “believer’s view). Either way this is another day in which the Old lady of Threadneedle Street achieves nothing much.
Talking of fiddling while Rome, Athens, Madrid and Paris burn, we move onto the ECB which cut its interest rate from 1% to 0.75%. Wow! That is really going to stimulate bucket loads of economic activity in Athens and Madrid. Not. I doubt that the cut will be passed onto borrowers by the banksters, it is a tiny cut and will make no difference to the dire economic situation of the Eurozone. Some (utterly deluded) commentators reckon that this shows that the ECB is, at last, acknowledging the seriousness of the crises. Tosh. That day will come when it either: a) goes for a mammoth bazooka of monetary easing not just a series of pea shooters or b) accepts that the Euro must be broken up into either two zones ( the Roger Bootle solution) or by jettisoning all the PIIGS and possibly France as well and sending them back to their own currencies. Until then the ECB is just achieving nothing which in itself is confidence destroying and thus bad for everybody.
