This is a bit spurious in that it doesn’t really make the picture any clearer – except in that it shows the huge gap between commitments and what’s needed:

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It’s from The Guardian. I trust that newspaper remembers the scale of the task required when it’s kicking the Tory’s for doing the job in a few year’s time.

(Source: The Guardian)

I can’t believe I’ve reached a point in my life where I’ll not only read a document like this, but actually share the fact that I have in public. But there you go.

From the official organ of the Financial Services Authority:

In a lecture at the CASS Business School in London, entitled, “What do banks do, what should they do and what public policies are needed to ensure best results for the real economy?” Adair Turner focused on the role that credit can play in driving asset price cycles, which in turn can drive credit supply in a self-reinforcing and destabilising process.

In the case of commercial real estate, for example, he comments that “increased credit extended to commercial real estate developers can drive up the price of buildings whose supply is inelastic, or of land whose supply is wholly fixed. Increased asset prices in turn can drive expectations of further price increases which drive demand for credit; but they also improve bank profits, bank capital bases, and lending officer confidence, generating favourable assessments of credit risk and an increased supply of credit to meet the extra demand”.

However, Adair Turner warned that using a ‘one size fits all’ policy approach to curbing asset price bubbles in commercial or residential real estate could have the unintended consequence of restricting credit to other real estate sectors of greater economic benefit.

He commented: “There is, therefore, a danger that at some points in the credit/asset cycle, appropriate actions to offset the economic and financial stability dangers of exuberant lending will tend to crowd out lending which funds productive investments”.

There’s plenty more where that came from.

(Source: FSA)

So says Bank of England deputy governor Charles Bean:

Mr Bean said Bank research “suggests gilt yields are lower as a result of the programme by a total of around one percentage point.” The comment is significant since the Bank has been reluctant thus far to quantify the impact on government borrowing costs.

If the scale of the fall was reversed when QE was unwound, it could mean that by 2014-15 more than 10p in every pound paid by the British taxpayer would be used to pay the Government’s debt costs, based on figures from the Institute for Fiscal Studies (IFS).

With yields already on the rise due to fears surrounding the public finances, Mr Bean’s comments underline risks surrounding the end of QE.

I know I’m a stuck record, but I wouldn’t touch gilts with a barge pole right now.

(Source: The Telegraph)

I don’t really rate Roger Bootle of Capital Economics – in fact he seems to be wrong more than he’s right – but he’s always readable.

His latest thoughts on quantitative easing, which he supported:

If I am right in thinking that the economy will remain very soft, that in the second half of this year inflation will plummet, and that after the election a programme of fiscal tightening will be put in place, then there will be cause to do more QE.

When would it be right to stop doing QE? The obvious answer is when the economy is convincingly recovering and seems likely to be able to sustain that recovery without extraordinary support. But there could be reasons to stop the policy even before that point was reached. If inflation fears took off because of QE then the policy could prove to be destabilising. But in present circumstances that seems unlikely. [...]

As I argued above, higher asset prices are one of the principle channels through which QE is supposed to work, so it would be bizarre to shout “bubble” as soon as asset prices rose.

My guess is that before too long the Bank will be back buying gilts and other assets in a major way – and quite right too.

Personally I don’t expect any of the things Roger Bootle expects in the latter half of 2010. But I could imagine we’ll see more QE just because of some fresh new mini-credit crisis aftershock. We’ll see!

(Source: The Telegraph)

Robert Peston on the BBC thinks that Northern Rock losing unlimited government backing means caveat emptor for the entire banking system:

While Northern Rock’s savers benefited from a formal guarantee from the government, the Treasury was also in effect promising that no saver in any British bank or building sociey risked losing a penny.

So in withdrawing the Rock guarantee, the chancellor is in effect restoring an element of caveat emptor to the entire banking market.

To be clear, the banks’ insurance scheme – the Financial Services Compensation Scheme – provides cover up to £50,000 per customer.

But if you have more than that in a single bank, well that increment is at risk. You can lose money if your bank has insufficient assets to meet its liabilities.

But that hardly applied last time, did it? You remember, when HMG bailed out UK deposits in Iceland?

British economists are currently divided between:

• The optimists: Those who believe we can happily borrow hundreds of billions a year without consequence.

• The inflationists: Those who are already polishing their wheelbarrow ready for shifting thousands of bundles of worthless tenners to Tesco to buy a loaf of bread in a couple of years time.

I exaggerate, but only a bit. Just ask The Telegraph’s Liam Halligan who says:

The Bank’s inflation forecast assumes a lot – not least the stabilisation of commodity prices and that a weakening pound doesn’t further raise import prices. I think both assumptions are wrong. As the market grows ever more concerned not only about the vast scale of the UK’s debt issuance but that inflation and/or sterling depreciation will erode the value of that debt, a fully-blown gilts strike looms larger. Such an outcome would be disastrous, causing chaos as the public sector’s bills went unpaid. Britain’s financial reputation would be destroyed for a generation.

I humbly concur. Who is buying gilts right now? Not even the Bank of England…