It’s not just outliers and those beyond the pale of the economic establishment any more.
Now, the warnings about the Bank of England‘s relentless programme of money printing, known in the jargon as quantitative easing, are beginning to issue too from the heart of the establishment.
This week, the influential Economic Affairs Committee of the House of Lords accused the Bank of England of being “addicted” to money printing, and charged it to show that some kind of exit strategy from permanent reliance on the printing presses actually existed.
The committee isn’t just comprised of obscure wonks, either.
Former governor of the Bank of England Mervyn King sits on it, as does influential economic historian Lord Skidelsky. These chaps know a thing or two about what can and does go wrong in modern western economies, and they are sounding the alarm.
Whether the Bank will listen is, of course, another matter.
The Bank of England has for some time been in the thrall of what are known as Modern Monetary Theorists, proponents of quantitative easing who argue that mistakes made while implementing money printing in the past can allow for its better execution this time round.
The monetary policy committee that decides such matters has been broadly behind the current programmes, with a key exception. The one member who is retiring, Andy Haldane, who no longer has anything to lose by dissenting, recently spoke out against the easing programme. The eight remaining members, however, whatever private misgivings they may have, have not broken ranks.
But there may yet be a change of heart.
The Lords’ Committee highlighted that the scale of the easing programme now amounted to 40% of gross domestic product, or a staggering GBP895bn. One key aim of the programme, to keep interest rates low, and thereby stimulate economic activity, has to a degree been achieved.
But there is a cost that goes with it, namely inflation.
And with inflation continuing to outpace the dovish predictions of proponents of Modern Monetary Theory, their credibility is beginning to be stretched.
Memories are still, just about, long enough to recall the devastation that inflation wrought on the global economy, and particularly Britain, in the 1970s. Those with the most bearish outlook argue that it could happen again, and therefore that policies designed to stave off two successive crises – the 2008 crash and Covid – could create a third crisis of even more severe proportions.
That there is a certain irony in this is hardly the point. The economic and social consequences will be huge.
In a sense though, the Lords is only playing catch-up to what markets have known for a long time. It’s no accident that inflation is rising as the value of money is declining, and those with a bit of economic foresight have long been placing bets on property, commodities and equities, all of which have seen their valuations hugely inflated over the past few years.
That the wealthy can protect themselves against the worst excesses of central bank devaluations is only a partial comfort. Because when the full impact hits the less well off, scenes like those we’ve witnessed in South Africa this week will be commonplace throughout the western world.
If ever a strong argument were needed for buying bitcoin and gold, this it. And, although they’d never come out and say it openly, the outcome of this week’s House of Lords Economic Affairs Committee meeting point to that conclusion too.