Friday, 7 October 2011

Never let anyone tell you that it's too complicated to explain

Sayeeda Warsi was on BBC Question Time last night, giving the Conservative viewpoint on quantitative easing.

Baroness Warsi has a remarkable ability to get my back up at the best of times, but after an explanation of QE that didn't really make sense - to this economist at least - where she said that it "feeds demand... will keep interest low, mortgages low... and gets this country moving again," she went on to conclude that "it's complicated".

A lot of things are complicated. Dark Matter is complicated, but I saw a perfectly watchable Horizon programme about it last night. Econometrics is complicated too, but I don't try to sell it to clients, by rambling something about statistics and then saying "it's complicated".

Shortly after our ability to understand quantitative easing was dismissed with "it's complicated", @Natt tweeted this little gem.

"It's not complicated. You're just devaluing everyone else's money to keeps banks afloat."

And in one short sentence, swept away a tidal wave of bullshit.

Never, ever let anybody tell you that something is too complicated to explain. They're either avoiding telling you the truth, or as Einstein famously said,

“If you can't explain it to a six year old, you don't understand it yourself.”


Anonymous said...

"It's not complicated. You're just devaluing everyone else's money to keeps banks afloat."

It's actually much more complicated than that, while I don't doubt that the talking heads on this program did not understand it either. The only group that can explain qe in a sensible way are the Modern Monetary Theory (MMT) people. Scott Fulwiller does a good job.

Neil Charles (@data_monkey) said...

That article seems a little confused. The British government isn't increasing the money supply by acting as an ultimate loan guarantor, it's buying bonds directly from banks at above market rate.

You can argue that because it's (supposed to be) a temporary measure then it's not inflationary but other than that, it's printing money.

Neil Charles (@data_monkey) said...

Er, Bank of England. They're independent of the government. In theory.

tifany underson said...

I think the solution is to keep mortgage interest low. Everyone would surely have an ease to it.

it contractor mortgage

Anonymous said...

This is the fractional banking, money multiplier system standard in the economics textbooks. If there is an inflow of gold, then bank deposit creation can increase and prices can rise.
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