By Maximilian Clarke
The Bank of England yesterday voted through a £75billion cash injection into the UK economy in a move that has been widely praised by business organisations, welcoming the move as a necessary boost to business confidence at a time of worsening economic crises.
But the executive director of a leading free-market think-tank, the Adam Smith Institute, has criticized the move; arguing that it will not address the underlying causes of the last recession and will serve to prolong uncompetitive and excessively risky business practices that may undermine a meaningful recovery.
Writing on the Adam Smith Institute blog, Tom Clougherty outlined his arguments against the controversial fiscal policy move:
More quantitative easing means more kicking the can down the road. It means preventing markets from adjusting, and it means perpetuating the misallocated capital, excessive risk-taking, and over-leveraged balance sheets that got us into this mess in the first place. To put it simply, printing money does nothing to solve our current problems. If anything, it makes them worse.
There will be no return to sustainable economic growth until the authorities realize that we can’t defy economic gravity forever. Recessions are about adjustment and recalculation, and as long as policy is designed to prevent the liquidation of bad investments, the paying down of debt, and the reallocation of scarce economic resources, recovery will remain elusive.
Here are the economic policies we need: an effective bank resolution regime, a stable monetary environment, and a thoroughgoing commitment to removing tax and regulatory barriers to investment and entrepreneurship. Right now, we aren't getting any of them.
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