According to the Governor of the BoE, the UK is in the grips of what is being called the worst financial crisis to ever hit Britain. As he announced an additional £75 billion QE, he also states that this is indicative of hard times ahead, harder than anything we have ever faced before.
In fact, he likens the current debt crisis to the 1930’s Great Depression and with this second round of money being pumped into the economy to prevent the rapid slowing down of inflation. With a double dip recession forecast in the near future and the current debt crisis in the eurozone, creating electronic money may just worsen the problems besetting the UK.
Sir Mervyn King feels that we are facing a problem of another kind at the moment and unlike the days when too much money was circulating, currently there is not enough. When there was too much money in the system freely flowing, the cost of living was driven up rapidly. Now that there is not enough even with the second round of QE, King feels we will be facing the greatest financial crisis ever, even greater than the Great Depression of the 1930’s.
Further, the Labour party feels that this need for QE2 is an open admission that the economic policy of government has failed. Since the economy is all but at a standstill, all bets are on the BoE with another round of printing money in hopes of stimulating the economy. Economists are saying that the government has been too reckless in their attempts to curb spending and have raised taxes to fast and way too far.
Instead of changing policy, government is full steam ahead with their austerity programme and this is being seen as a critical mistake by growing numbers of economists. In the end, the greater risk is seen as another recession as opposed to inflation which had been the chief concern. Although QE is fast approaching £275 billion, before all is said and done QE may even breech £500 billion and maybe even more than that.
