Bank of England Governor on quantitative easing

The Financial Times reports:

Sir Mervyn warned there were limits to the BoE’s policy of quantitative easing, under which it prints money and injects it into the economy by purchasing bonds: “Printing money is not . . . simply manna from heaven. There are no short-cuts to the necessary adjustment in our economy.”

And the BoE only did it because their cash rate couldn’t go lower.

Sir Mervyn also rounded on those calling for his institution to cancel the government debt it owns. Lord Turner, chairman of the Financial Services Authority and a leading candidate to replace Sir Mervyn as governor next year, mused about debt cancellation in a speech earlier this month. Calling such ideas “bad money creation” which would fudge monetary and fiscal policy, Sir Mervyn said “the BoE could not countenance any suggestion that we cancel our holdings of gilts”.

This will be the next policy from Dr Norman. Just have the Reserve Bank cancel all government debt. Bingo. Problem solved.