Monetary Policy Finally Explained

Turns out you just make it up as you go - not just the money, but the terminology - everything - just make it up!!!

Melissa Kite in Britain's The UK Telegraph:

ACCORDING to Wikipedia, "quantitative easing" is "the creation of new money out of thin air by a central bank, and its injection into the banking system". The men in pinstripes press a few buttons and tell themselves they have pound stg. 150 billion more than they thought.

This is the banking equivalent of pretending you just found a pound stg. 10 note down the back of the sofa and ordering a pizza to celebrate, on the basis that you won't be able to pay when it arrives but waiting for it will be quite jolly. Only bankers think this is reasonable.

Of course the Q word is just one of dozens of terms in a baffling new lexicon that we are all having to come to grips with. You know you're not in Kansas any more when people are rattling on about credit default swaps, capital structure arbitrage, deposit multiplication, fractional reserve banking and derivative exposure gaps. Actually I made that last one up. I'm getting into the swing of monetary make-believe. I wonder if it isn't possible to converse fluently in "bankspeak" simply by adding a rogue extra syllable to normal words. For example, I'm sure derivitatives, liquididity, redevaluation and de-inflation are terribly clever concepts. If they haven't been invented yet, I'm sure they soon will be.

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