Whoopee: Bank of England has a new and sub-standard chief economist, Huw Pill.

 

 If you want an example of beautifully crafted English which boils down to saying nothing much, (one of the main skills possessed by those, like Sir Humphrey Appleby, at the top of the British establishment), I recommend Huw Pill's chapter (Ch3) in this NIESR publication. It's entitled “Renewing our monetary vows.” 

Incidentally, the NIESR at the moment seem to be the World's experts at churning out content free, sleep inducing hot air. It's an organisation which specialises in consuming taxpayers' money, not so as to promulgate knowledge or ideas on economics, but rather to do what a significant proportion of academics do: publishing content free waffle so as to further their careers.

Anyway, QE is one of the main topics of Pill's above mentioned chapter, if not THE MAIN topic, and his conclusion (his last para) is that “defensible limits” on “central bank financing of government deficits” are needed. But what makes him think that a central bank which has an inflation targeting mandate would let CB financing of govt deficits get excessive? Given too much inflation, any such CB would do one or more of several things: e.g. 1, stop any more QE, 2, put QE into reverse, 3, raise interest rates which comes to much the same as reversing QE: i.e. a central bank which aims to raise interest rates will (inter alia) sell govt debt into the market. 

So why the need for “defensible limits”?

Pill's point is a bit like saying we need “defensible limits” to the amount of water the fire brigade pour on burning houses, else the excessive amount of water poured on the house would do more harm than good. The answer to that is that every fire-fighter knows (as indeed does every ten year old) that once a fire is obviously out, no more water needs to be poured on it.