"No business is good business": undermining QE?

The level of money in the economy has an important influence on demand, and so on economic production and growth. The Bank of England has expanded its quantitative easing, injecting money into the British economy, by a further £50 billion, taking the total to £325 billion. At the same time, reports which focus on the rewards given to RBS’s Chief Executive have been emphasising what a splendid job he has been doing in rationalising the bank’s balance sheet, shrinking its holdings by £600 billion to date, with a further £200 billion to come before long. That seems to square with a view attributed to some banks – “no business is good business”. These two figures are not commensurate or directly comparable – RBS is disposing of assets as well as loans, outside the UK as well as within it – but the relationship is close enough to raise questions. While the BoE is injecting money into the economy, RBS is working assiduously to take money out. And that raises the question, not whether Stephen Hester is being overpaid, but much more seriously, whether he is being paid to do the wrong things.

Leave a Reply