Tuesday, 14 February 2012

Economic illiteracy from “Professor” Moorad Choudhry.

I’m not surprised the Royal Bank of Scotland went bust. “Professor” Moorad Choudhry, senior RBS official, is totally clueless on the subject of money.

First, he claims that quantitative easing (QE) is a euphemism for printing money. Well QE is certainly referred to by journalists in the populist press as “printing money”. Perhaps that’s where Choudhry gets his information. But the truth is that it is very debatable as to what extent QE really equals printing money.

Money (or to be accurate, “monetary base”) is simply a central bank liability that pays no interest. In contrast, traditional government debt DOES PAY interest. But rates of interest are currently so low that its debatable as to whether there is any significant difference between traditional debt and monetary base. To the extent that there is no difference, QE does not equal printing money.

He then says, “There is only so much a government and a central bank can do to assist recovery, and after that it’s a question of sitting back and letting events take their course.” But he immediately contradicts that by saying that (at least in the case of the EU) governments can do more.

He then comes out with the standard right-wing or conservative claim that “We need to do more to tackle labor market constraints…”. Well obviously it’s always desirable to deal with labour market constraints or any other type of constraint.

The more relevant question is, whether these constraints explain the credit crunch, and hence whether reducing these constraints will contribute significantly to escaping the recession.

Well labour market constraints today are much the same as they were prior to the crunch, thus these constraints do not explain the crunch. Ergo the claim that reducing these constraints will do much to get us out of the recession is implausible, to put it politely.



  1. This is all very silly and illogical. Your trying to dismiss someone speaking about monetary economics when you clearly don't know much at all about the subject points to your being desperate to....I don't know, to do something. I don't get it.

    1. You don't actually point to any mistakes I've made in the above article. So I assume you can't spot any.


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