EDITOR'S LETTERMerryn Somerset Webb
Osborne’s horrible hybrid policies
A quiz for you. Fiscal policy can effectively be defined as the redistribution of the nation’s wealth from one group to another. Monetary policy can be defined as the manipulation of the money supply. So what is quantitative easing (QE)? Is it a monetary policy or is it a fiscal policy?
It is usually considered to be the former. The Bank of England creates money and uses it to buy assets. In doing so it increases the supply of money. But look a little closer and you will see that it is a fiscal policy too. In keeping rates down and creating a series of asset market bubbles, it is transferring wealth from one group to another.
Those who own equities, bonds, or property in the southeast have become much richer. Those who have been forced to buy an annuity, who rely on a fixed income or who once hoped to live on savings interest have become much poorer. So QE is actually both. It’s a monetary policy and a fiscal policy (which is a very good reason why we shouldn’t do it any more).
But QE isn’t the only policy that isn’t quite what it seems. Look at Help to Buy…
• Read the full editor’s letter here: Osborne’s horrible hybrid policies