March 6, 2009

It was coming, but now it is here: The government has finally gone mad. A decision to put another £150 billion into the economy to “improve cash circulation” is pure voodoo economics and will guarantee inflationary pressure unseen since Mugabe’s Zimbabwe and the Great Depression.

The shocking announcement yesterday by Labour chancellor Alistair Darling that he had authorised the Bank of England to print the banknotes after buying assets such as government securities and corporate bonds will mean that that bank will put more money into circulation than at any one time in its 300-year history.

Media today quoted former Treasury advisor Dr Ros Altmann as warning that “We should all be extremely worried that the Bank of England appears to have abandoned its core remit, which is to safeguard the nation against inflation.

“By providing massive monetary stimulus while inflation is still way above the two percent target, the Bank of England is flying blind,” Dr Altman said.

“Make no mistake, this will most likely mean a massive inflationary problem in years to come. This is a giant gamble, a leap in the dark, with taxpayers’ hard-earned money.”

In addition, financial experts have expressed concern that the billions of “new” pounds will devalue the British currency, which in turn will also bump up inflation as imports become dearer.

The most recent use of “printing more money” to overcome an economic crisis was in Robert Mugabe’s Zimbabwe. Prior to that, pre-World War Two Germany also tried the same trick. Both ended up with catastrophic inflation which wiped whole sectors of society off the financial scale.

The policy, which is now known as “quantitative easing” is designed to increase the amount of money in circulation.

The Chancellor has sanctioned the Bank to create £75 billion in new money over the next three months, and up to £150bn in total.