Bernanke Launches QE3

MORNING BRIEFING – By Benedict Brogan (Daily Telegraph).

The big news overnight was Ben Bernanke’s announcement of the Fed’s QE3 programme. The central bank will print money and use it buy $40bn of mortgage bonds each month in a bid to encourage lending in the housing market and keep rates low for mortgage holders. At the same time, zero interest rates will be with us until 2o15.

Despite the large sums involved, the remarkable quality of yesterday’s announcement was the lack of drama in the market reaction. Gold and the Dow did well, but as the Telegraph’s Ambrose Evans-Pritchard wrote:

“Quantitative Easing has become banal, a fine-tuning tool like any other. It is by now drained of all drama. Even the Federal Reserve’s hawks have lost the will to resist. Five of the six critics acquiesced.

“It is pocket-sized compared with the pace of $75bn a month in the QE heyday, or the 500 basis point rate cuts at the onset of the Great Recession. This is calibrated, not full-throttle. ”

Back home, the green shoots debate continues. The contrast between the stirrings of optimism that Jeremy Warner explains here and the implied bleakness about prospects in Ben Bernanke’s decision, which the FT (£) hails as “stunningly bold”, is striking.

The OECD has found reasons for the Chancellor to be optimistic. But once again there’s signs of something stirring in the undergrowth. The Times (£) has done another of its cryptic leaders that suggests Mr Osborne may have grounds to ditch not just his debt target, but the deficit one as well:

“It seems increasingly likely that the political price of sticking to this second target could be higher than the cost of scrapping it. The Government may find that hitting the target could involve significant cuts into public spending that not only hurt vulnerable people but would take money out of the economy just as it was beginning to see fragile signs of growth.”

Do I detect a softening up exercise for the autumn statement? Is Mr Osborne preparing the ground for a shift in policy? You would think not, given what that would mean for his credibility.


Green shoots may be all the rage in the Treasury, but green policies are not. At least that is the view of the participants in what looks like a coordinated hit on George by green enthusiasts.

In the FT (£), Ed Davey’s remarks in the Commons yesterday when he discussed a carbon dioxide emissions target for electricity plants by 2030 has been reported as a direct challenge to the Chancellor who fears it would deter investors.

Meanwhile, the Telegraph reports that Lord Deben, former Environment Secretary John Gummer who has been appointed as the new chairman of the committee on climate change, has written to George telling him that his plan to centre the UK’s energy strategy around gas will be incompatible with the terms of the Climate Change Act.

And if that wasn’t enough, businesses are already complaining loudly about possible cuts to green subsidies. Proof George’s ability to make greens from across the spectrum see red.


Not for the first time this week, Vince Cable will set out plans to mend the economy. Today’s edition sees him announce a plan to cap payouts for unfair dismissal from an upper limit of £72,300 to an as yet unspecified lower limit.

Dr Cable is talking up how he saw off Mr Osborne’s hope of bringing in no fault dismissal. But as business groups will tell you, it was a non starter anyway. What is clear is that Michael Fallon, the Minister for Growth, and the other Vince minders have got their way on watering down the compensation people can hope to get for unfair dismissal. Expect Chuka Umunna to point out that the move represents ‘an attack on the people in Middle Britain – the architects, accountants, surveyors and other professionals who might hope to get the current level of payout’.

As was the case with his business bank earlier this week, Dr Cable’s reforms are open to criticism – only six per cent of awards are above £30,000 each year, and only two per cent above £50,000.

Today’s FT (£)reports that Vince is still undecided upon including reforms to paternity leave in the reform package, and has definitely killed off the idea of no fault dismissal proposed by Tory donor Adrian Beecroft.

Although there will be no ‘fire at will’ reform, the Times reports that sacking will still be easier for firms, adding that employees who leave in acrimonious circumstances will be able to waive their right to appeal in exchange for a good reference.


Vince Cable’s texts to Ed Miliband have drawn the ire of former Lib Dem leader Sir Ming Campbell. The Daily Mail reports that Ming openly rebuked Vince in the latest edition of The House magazine, saying:

“If you were a Tory backbencher hearing of these things, especially one who’s disaffected, who wishes there was an unrestricted Tory government, what would you make of it?

“Would you be encouraged to be yet more loyal to the front bench or would you say well, that’s a kind of, maybe, not a green light but an amber light.”


This morning’s Independent reports that Graham Brady, chairman of the 1922 committee, has now been contacted by 14 rebels requesting a leadership election. The number is still well short of the 46 signatures required to force a vote. Our story puts the number of malcontents at a dozen, but confirms that, although limited in scope, there is a plot amongst Tory backbenchers to oust Dave.

In my blog, I have argued that whether 14, 12 or five, Dave’s position is not yet under serious threat:
“I don’t know whether Mr Brady is running things differently. Maybe he is keeping a running tally and sharing it with colleagues in a way that would allow it to leak out. But I rather doubt it.

Of course, it may be the case that those who have written letters are parading themselves in the tea rooms, in the manner of Derek Conway waving his letter to the television cameras before delivering it to the Chairman of the ’22. Maybe some are, but again I have no evidence of it. As I have argued before, it would require things to get far, far worse before the prospect of a leadership challenge can become remotely credible.”


In a bid to calm MPs, the Independent says that the Prime Minister is set to pull back from plans to slash the number of parliamentary constituencies from 650 to 600. The Liberal Democrats have already been selecting candidates based on the old boundaries, and senior Conservatives believe the party will be left behind if it waits any longer.

Now it’s only being left 11 points behind in the polls they need worry about.


John Bercow held on to the gold-plated pension he was expected to give up yesterday, although he did promise not to draw his £39,000 a year entitlement until he turned 65, says the Times (£).

Very decent of him, although the Speaker’s claim to have “saved” £430,000 by claiming his public pension at the state pension age will probably see more eyebrows raised at the largesse of parliamentarians’ pensions than Mr Bercow’s generosity of spirit.

In other news, the Speaker has been explaining what attracted him to the right wing of the Conservative’s at the start of his political career. The Mail’s diary reports:

“Now a presumed Labour supporter, like publicity-mad wife, Sally, he explains in an interview: ‘Possibly the fact that I was physically quite feeble, a relatively short little fellow, attracted me to that idea of a very authoritative and aggressive version of Conservative politics.’ He’s still authoritative and aggressive. Is being small in stature still an issue?”


Is presided over by Vince, according to a TaxPayers’ Alliance report. The Mail picks up on the report which reveals that the department pays more than any other in Westminster for paper and manages to pay twice what anyone else does for units of electricity. Excellent efficiency from the Business Department.


Claire Perry comes to a realisation which dawned on many a while ago:

@claire4devizes: “Just seen and retweeted tweet saying that common sense has nothing to do with Economics. God help us.”


In The Telegraph

Fraser Nelson – What would the Age of Ed mean for Britain? Even he doesn’t know

Philip Johnston – Could a cover-up like this happen now?

Jeremy Warner – Don’t mention green shoots, but the economy shows signs of life

Michael Clarke – Looking the American giants in the eye

Best of the rest

Philip Collins in The Times (£) – Ignore the slogans. It’s all about leadership

Samuel Brittan in the FT (£) – How to put the liberal back into the Liberal Democrats

Simon Jenkins in The Guardian – Hillsborough shows it’s time for elected police commissioners

Baroness Cox in the Daily Mail – Sharia marriages for girls of 12 and the religious courts subverting British law


Today: Business Secretary Vince Cable to announce measures on reforming employment law.

8:30 am: Reform conference on the future of policing. Keynote speech by Bernard Hogan-Howe, the Metropolitan Police Commissioner. Political panel including Charles Clarke, Shami Chakrabarti, and Baroness Hamwee.

9:30 am: Second reading of Gavin Barwell MP’s Private Member’s Bill tackling mental health discrimination. Government and cross-party support expected. House of Commons.

Quantitative easing: Pensioners are paying the price for Sir Mervyn’s ‘funny money’

Let’s try a thought experiment. Imagine that George Osborne were to stand up in the House of Commons and declare that, in order to avoid a new economic crisis, he had decided to raid our pension funds. The Treasury, he would say, had reluctantly concluded that it had no choice but to confiscate about £74 billion from what we’ve all been saving for our retirement. Furthermore, VAT would have to rise by another 2 per cent. The cash would be used to reduce the interest rates paid by Britain’s borrowers (his Government chief among them). And yes, he would add, it probably seems grossly unfair to transfer wealth from the thrifty to the profligate, but this is an emergency. The alternative is another banking crisis, or a new Great Depression.

If Mr Osborne did say all that, there would be uproar. The Chancellor would face unflattering comparisons with Robert Maxwell. Pensioners would be protesting outside Westminster, asking what right the Government had to steal their savings. The Institute for Fiscal Studies would publish graphs showing the “unfairness” of a VAT rise, since it would hit the poorest hardest.

Read more….

Quantitative easing: not actually evil

Back in 2009, when the Bank of England first started its quantitative easing programme, Vince Cable denounced it as “Mugabe economics”. George Osborne said it was “the last resort of desperate governments”, adding that “in the end printing money risks losing control of inflation and all the economic problems that high inflation bring”. Quantitative easing, it was implied, would devastate the country. All this free cash #printing money, everyone called it, as though you could still hear the presses rumbling on Threadneedle Street# would set off astonishing inflation; soon we’d be using £5 notes as cigarette papers.

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Bank of England injects £50bn into economy

The Bank’s Monetary Policy Committee voted to increase its quantitative easing programme, which will take the total assets purchased to £325bn since the process was first started in March 2009. It said the latest round of purchases would take three months to complete.

Interest rates were left on hold at 0.5pc as expected.

In a statement accompanying the decision, the Bank justified its decision against a backdrop of a weak economy, uncertain outlook, and falling inflation. It said without more stimulus, inflation was more likely to fall below the 2pc target in the medium-term.

The Bank said: “In the United Kingdom, the underlying pace of recovery slowed during 2011, with activity falling slightly during the final quarter.

“Some recent business surveys have painted a more positive picture and asset prices have risen. But the pace of expansion in the United Kingdom’s main export markets has also slowed and concerns remain about the indebtedness and competitiveness of some euro-area countries.”

Read more….