Watch out, England's Shut the Quantitative Easing Spigot

Today the Bank of England finally put the kibosh on quantitative easing (QE), after it wrapped up £200 billion of asset purchases last week. It’s a big step in a return to normal monetary policy and a substantial vote of confidence in the recovery. That’s a vote that could easily prove foolhardy, but is certainly bold… which is good too, right?

It’s not that continuing the QE is a better strategy… it’s just that the UK may have benefited most from never having begun a stimulus program at all. If nothing had been done in the first place it would have, at the very least, saved the current hassle of deciding when to return to doing nothing once again.

According to The New York Times, it gave Chancellor Alistair Darling a fine opportunity to wax enthusiastic about the program coming to a close:

“‘That’s a decision for the MPC (Monetary Policy Committee) which is rightly independent of government, but I think their decision was right,’ he added in a transcript of part of the interview released by the Treasury.

“When asked about U.S. bond fund Pimco saying high government debt meant gilts were ‘resting on a bed of nitroglycerine,’ Darling said: ‘In the markets people say things for different reasons, if you look at the commentators as a whole they rather take a more sensible view.’

“Darling also said he saw no prospect of Britain, which has a record budget deficit, facing similar troubles to Greece.”

Perhaps it’s reassuring to some UK citizens that, despite the record budget deficit, he sees no prospect of sovereign debt troubles in Britain. Though, those who are a bit skeptical may be better off.

The move has the funny odor of a contrary indicator. Much like his complaint about Pimco, it sounds an awful lot like Darling is just talking his book.

Read the details in New York Times coverage of Darling welcoming the BoE’s move on QE.

The Daily Reckoning