Time to End QE and Low-Interest Rates

Olivier and Mann - Time to End QE and Low-Interest Rates

Olivier and Mann – The Bank of England (BOE) is being urged to put an end to quantitative easing (QE) and low-interest rates as they are damaging the UK economy.

The quantitative easing scheme or asset purchase program, together with low-interest rates were introduced by the BOE as a counter to the financial crisis almost a decade ago.

However, both financial programs are still being used by all leading western countries and their continuous implementation should be halted to save their countries from any enduring effects, according to the Centre for Policy Studies, a leading UK think-tank.

Politicians have been continually using the programs as they are attractive to countries such as the UK and the US, both of which still spend vastly more than their incomes.

The BOE’s move to hold on to its fast and easy fiscal policy as long as it can leave the government with no other alternative other than more QE should a sudden downturn occur. Quite alarmingly, since combining almost zero interest rates and multi-billion pound asset-buying schemes, growth has failed to seen in the amounts expected and deflationary pressures remain

The presence of low-cost capital resulted in the proliferation of “zombie” businesses and the BOE’s program has given them no choice but to invest pension funds into lesser attractive government bonds, endangering them significantly if interest rates suddenly go up.

It has also increased the value of real estate and investments which have further widened the gap between the financially well-off and those from middle and lower income households.

Ultimately, the program has resulted in the general sense of injustice and disparity in many of the developed countries.

The political or economic reasons for the current situation should be faced, difficult politically as they are, and policy should go back to something closer to “normal” levels.
The country’s fiscal program should normalise and should eventually showcase the competence of politicians, indecisiveness to change objective will be more harmful.

The notion that it is useless to save, and that mortgages should not be costly doesn’t tally with common sense. Low-interest rates are convenient for those in debt, including national governments, but is harmful to the general population and tough decisions need to be taken, not just in the U.K.

The delay in lifting QE and not increasing rates would render the world’s monetary structure exposed to any possible downturn that resembles the former EU crisis. The procrastination of central banks to delay acting means that any future economic crisis may be even more devastating than the previous one.