FT letter: Deflation dangers disappeared, monetary easing must stop

by Dr. Ros Altmann

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Sir

As always, Martin Wolf (June 3) offers a comprehensive analysis of the stance of Anglo-Saxon fiscal and monetary policies. However, with great respect, I believe his conclusions are wrong. The rise in government bond yields does not prove policy is ‘working’. It proves that policy is overdone.

The markets are waking up to the enormity of the sums involved in recent panic policy easing and they don’t like what they see.

Policymakers and financial commentators are failing to recognise – yet again – when things have gone too far. Fiscal expansion is inescapable for the moment, but aggressive monetary easing can stop straight away.

Maintaining an overly easy policy stance may make us feel better short-term but it will inevitably mean much greater problems down the line.

If we care about our children, we should listen to Angela Merkel’s call for the urgent abandonment of Quantitative Easing. She recognises the medium-term dangers of pursuing a ‘growth at all costs’ agenda, as implied in the Fed and Bank of England’s remits to pursue high growth. This is not what we need. After all, it was this style of thinking which caused the credit crisis in the first place.

As Martin Wolf rightly says, deflationary dangers have disappeared. But this means massive monetary stimulus is no longer justified and the sooner the Bank of England abandons Quantitative Easing, the better.

Yours faithfully,

Dr. Ros Altmann