It depends on what you want to do with the money. There is an argument that the money the B of E created to give to the banks via quantitative easing so they had money to lend in an attempt to kick-start the economy would generate more economic activity if it were parachuted into every citizens pocket.

However be that as it may you still seem to be under the impression the government is borrowing at some punitive rate off the banks. They aren't. To borrow they issue bonds as I explained. Printing money is not an alternative to that.

We then have the other aim which is to increase the money supply which is when the B of E employs quantitative easing. That isn't borrowing.

You also seem to be saying the fact money supply increases due to fractional reserve banking can or should be replaced by the B of E printing the cash instead. That would simply devalue the currency even faster than we have seen due to the amount of quantitative easing already occurred and inflation would rocket not just go up as the currency devalued more and more.



Well its not like you think that is for sure. You are on about printing billions with the aim of increasing the money supply without that being backed by any kind of asset value. That is nuts.

When they use QE the B of E uses the money it prints to buy assets off banks. The banks then in theory lend the money on (at low interest rates because you don't do QE when interests rates are not low). This policy may or may not work in its aim but you can't just print money as an alternative way to increase the money supply.



A different issue and so long as the interest on the debt is serviceable that doesn't really matter.

Yes it does increase inflation. To use your example, that £300 given to the chair maker increases demand in various markets. Say he uses £200 of it to actually make the chairs then that's increases demand for the materials he uses to make the chairs, plus any other costs like electricity etc and he uses £100 to live on whilst he makes the chairs, so that's an increase in demand for food, water etc

But if there were spare capacity in supply of those things that may be purchased (ie in recessionary times where stimulus were needed) would it create inflation?

Yes. The price would be higher than it would have been. It doesn't mean it's a bad thing to do, the benefits in increased demand, higher employment etc might outweigh the negative of higher inflation.
In a recession (or recession-like conditions) it would make sense for the government to fill some of the demand gap by a combination of higher borrowing and temporarily printing money. (So long as the printing of money is controlled by a body other than the government. Ie the Bank of England)

But why would prices increase just because demand increased when there was spare capacity and maybe unsold stocks? It is possible to print money without inflation but the danger comes if the printing goes on too long. and that's something that can only be judged in hindsight.

Because if there's spare capacity and unsold stock then companies have to lower their prices to sell that stock, if they don't sell anything they'll go out of business pretty bloody quickly. Prices won't necessarily go up, but will either stay stable or not decrease by as much. So prices and inflation are higher than they would have been, which is an increase.
It is almost impossible to print (and effectively use) money without inflation, but there might be additional deflationary factors that are either stronger or even it out.

Precisely.

That still doesn't mean that the policy itself isn't inflationary.

No one would be doing it if it weren't for fear of deflation.

LeighGionaire: the only person I know who is less economically literate than George Osbourne.

Well you could argue that, indirectly, it was...

*hides under tinfoil hat*

Yeeees. Indirectly, is the word.

That's not what they're meaning.

I have heard, more than once, the: 'steel doesn't melt at ...' argument. They get laughed at. To their face. And not just by me.

rlCheck this outrl.

A school is found to have asbestos. Then the HSE changes its mind and says it's safe, even though other independent inspections say there is a problem. And the HSE won't release the report.

That would be one way to save money.