This week David Miles, one of the members of the Monetary Policy Committee, addressed the Society of Business Economists stating that this recession is the worst of any within the past century. He contends that the current recession was caused by a banking crisis said to be the worst in history. In fact, the current recession is indeed 9% lower than the 1973 recession.
Instead of having a GDP at 10% higher than when the crisis began in 2008, it is now 4% lower which would not have happened had the UK been on its projected target. Mr Miles was the only member of the Monetary Policy Commission to vote in favour of another round of QE this month which he felt would be the stimuli needed to kick start the economy out of its slump.
At issue was another £25 billion QE but other members voted against this stimulus package because of inflation that remains persistently high. According to Miles, the GDP would now be 10pc higher than in 2008 as opposed to 4% lower where it now stands. Furthermore, Mr Miles points out that this is even a larger gap than four years into that of the Great Depression during the 1930’s.
Both the IMF and Mr Miles believe that another round of Quantitative Easing is called for even though it may send inflation even higher. According to Miles, the alternative may be worse which is why he voted for a new stimulus package.
Earlier this week the IMF urged the BoE to cut rates and increase its current £325 billion QE to prevent further downward spiralling of the economy which may indeed result in damage that could very well be permanent. It is also projected that unemployment levels will continue to stay high which is why further QE is urgently needed.