Home page

One of the main results of quantitative easing has been the discrediting of the foundation of monetarism in the form of the Quantity Theory of Money (QTM). This basis for justifying monetary policy has created enormous prejudice on the part of constituents; the depressing track record has provided sufficient evidence to demonstrate that QTM is a hoax. Doubts raised by Milton Friedman's inability to explain specific critical aspects of monetarism, related to interest rates, "demand" and prices, in the 1970s have become more apparent. There is in fact no practical application for such fuzzy theory and thus the normal outcome is a lack of policy traction. This is why QE doesn't work and, indeed, is an attack on the sustainability of the economy. This raises the delicate by relevant question as to the real objectives and justification for existence of central banks when their policy model is vaporising in a depressing fashion for all to see and feel in their pockets, exposing the fact that the policy tool bag is empty. A separate post on this topic is in preparation....

Further revelations concerning what the government has not taken into account in its planning, only adds evidence that a no deal exit from the EU is no longer an option for the UK or Europe.

First of all the real performance of the economy has been declining in real terms for over a decade driven by the policy of quantitative easing (QE) combined with the cut backs on the public sector under "austerity". This has led to a reduction in investment in the productive economy and re-routing of low interest debt into assets by the banks and large corporations including widespread buy-backs of shares, driving up the values of shares without reflecting an substantive improvements in corporate prospects and therefore misleading potential shareholders. Savers surviving off fixed returns have been liquidated and pension funds are on the verge of facing negative yields on fixed term investments and equity. Already in the EU pension fund managers are being asked to purchase securities with negative yields because of ECB continual extension of QE; the ECB having created this crisis, is intending to extend QE yet further. The ECB head Mario Draghi's reinitiation of asset purchases from corporations provides no collateral what-so-ever and now the ECB's policy is out of proportion to the economy's ability to support this downward spiral. This because this process that is obviously weakening the economy diminishes the likelihood of recovery while debt continues to rise to unsustainable levels. Thus the levels of government and private debt now exceed the pre-2007 situation. In the UK, lower middle income families are facing an encroaching cost of living crisis and many people in work, including public service employees, are having to compensate for their declining income purchasing power by resorting to the use of food banks. The international economic tensions promoted through the belligerent rhetoric and actions by the USA, often with the political, policy and often military collusion of UK governments in imposing economic sanctions are causing misery and an unsettling confrontation between the USA and China, Iran and many other countries.

It is self-evident that this is not the time to take decisions that risk adding more instability to the considerable existing uncertainty about the future of the ability of the British economy to support the wellbeing of the people of this country.

The Yellow Hammer report, so-called, provided a glimpse of some short term considerations of the no deal implications on the logistics of goods, food, medical supplies and services. However, there are more fundamental potential medium to long term impacts on the British economy, household purchasing power and employment levels linked to the sensitivity of the cash flow of many services to the timely operations of supply chains that cross the borders to the EU. This sensitivity could become a trigger for considerable instability over which conventional macreoconomic policy instruments would have no obvious means of controlling.

Composite from Alex Salmond Show1: Salmond, Blanchflower, Kerevan and Murphy

Tasmina Ahmed-Sheikh2 introduces and links the sections of the Alex Salmond show securing an effective continuity in production
One of the online mediums to provide some very useful analytical discussion on the current circumstances is the Alex Salmond Show a production on the Russia Today channel. Alex Salmond is well known to all as the former head of the Scottish National party and he has done a good job in covering questions that are not covered so well by so-called mainstream media. He is ably assisted by Tasmina Ahmed-Sheikh a former SNP MP at Westminster. Tasmina introduces and summarises segments maintaining an clear informative flow to link production sections together.

Recent interviews have included excellent interviews with the former Bank of England Board Monetary Policy Committee member and economist David Blanchflower, the economist George Kerevan and former MP and Richard Murphy a leading taxation specialist (Tax Research UK) and a member of the Tax Justice Network.

These interviews are fairly comprehensive and can be followed on the links below.

On the RT site there are also Podcasts for the same shows.

Alex Salmond interviews David Blanchflower

Alex Salmond interviews George Kerevan and Richard Murphy

On the practical policy "contributions to solutions" front, George Kerevan provided some evidence on the UK declining economic performance and explained the role of a national development bank, such as that being set up by the SNP government in Scotland.

Amongst the apparent oversight by the government concerning a no deal BREXIT Richard Murphy calls attention to the matters mentioned in our introduction concerning cash flow and the fact that many logistics transport companies lease their lorries meaning they cannot afford to be stationary beyond scheduled periods because of the very tight margins in this business. This could result in many hauliers either getting into debt, raising their prices which will impact final consumer or go bust.

VAT administration, currently effectively coordinated within an integrated EU system will become a headache for companies who will have to recover VAT paid, again causing cash flow issues and difficulties for companies with low margins and low turnovers. There could therefore be layoffs in logistics companies and price rises which can create real disposable income impacts on families. The EU integrated base for VAT coordination has taken years to cut down on Internet fraud and non-payment of VAT by the large internet marketing groups and this control will be lost on the UK side. With the constant reduction in HMRC staff over the last few years, it is likely that there will be substantial losses in government revenue collection as a result of staff shortages and absence of suitable information management systems; it is likely to take years to adjust and to reduce the leakage from the system.

With the economy in such a weak position, as explained by Salmond's interviewees, all of this could trigger a cascade of corporate closures, job losses and inflation similar to the slumflation of the 1970s-1980s.

It would seem that the government should have developed DABs3 on these specific issues that could have medium to long term negative impacts on the UK constituency.

Lastly, a point rasied by Murphy and which, on reflection, is almost self-evident while seldom appreciated, is the fact that for the party of government to claim they are pro-business is difficult to comprehend when the direction of travel is clearly anti-business.

1  © TV-Novosti 2019; composite by GEL (Great Effects Lab);

2  © TV-Novosti 2019; by GEL (Great Effects Lab);

3  © DABs-Decision Analysis Briefs, see The party is almost over