Turning off the QE tap is going to be impossible

And it's no laughing matter. Try asking the record 20.2 per cent of US households stuck on food stamps.

Ben Bernanke pulled back in horror from a 1937-style repeat of Marriner Eccles’ premature emasculation of the economy, in Helicopter Ben’s case from his very own flagship QE policy: the FOMC decided not to taper its $85 billion monthly dose of QE steroids, as previously notified. These steroids were meant to be a shot-in-the-arm for the US economy, whose recovery is stuck very alarmingly in neutral: only 169,000 new jobs in August does not recovery make.

QE is now linked to unemployment – still stuck at 7.3 per cent, despite a record number of job no-hopers conveniently falling off the other end of the escalator. The US has actually lost 347,000 jobs in the past two months. House sales and mortgages, which are linked to 10-year Treasuries whose yield has doubled, have also stalled. The US economy, like the Fed, is backfiring badly and is nowhere near escape velocity.

QE tapering is now to begin when unemployment reaches 7 per cent – but it’s only at 6.5 per cent that the QE tap will be finally turned off and interest rates rise, depending on the reality on the ground, and not these meaningless spin-driven, manipulated, distorted, half-truth figures for unemployment. What has also become clear, however, is that these US steroids went global and are creating lax monetary conditions and consequent asset bubbles from Timbuktu to Chongqing and back again.

Isn’t this where the Global Crunch started? When Ben Bernanke announced in June that tapering would begin in September, he under-estimated the global reaction: horror! Money rushed back to the dollar, and the promise of higher US rates to come, as the yield on two-year Treasuries doubled since May. This bit wasn’t in the Bernanke script.

The Fed watched this global reaction with trepidation, as though they only now realised the global impact of their own printing presses and the consequent need for low interest rates.

Public debt everywhere is still far too high – the UK is having to borrow £115.7 billion this year and cannot afford higher interest payments; nor are the markets ready to fund public debt which is out of control in most of the G20; bank balance sheets are stuffed with bonds, and rising rates would trigger losses, and another banking crisis; that would have led to withdrawals of their special deposits earning just 0.25 per cent, and rocked the Fed itself; and there lurks the threat to emerging markets and another Asian currency crisis. Luckily for the Fed, inflation remains subdued – if you believe government figures.

The real error is that the Bernanke thought QE would rescue the real economy, but buying existing bonds and mortgages does not add a bean to aggregate demand, and it is consumer demand, buried under old debts and slowing real wages, which is the missing spark to re-ignite the US economy. And the obvious cure is tax reductions, but that means more debt, or actual or mandated cuts.

Unfortunately, it’s still stalemate-time again on Democrat tax increases versus Republican expenditure cuts on Capitol Hill. And worse still, it’s time this month to settle the acrimonious issue of the budget and the US Total Debt Ceiling ... Obama is the man stuck inside the shrinking Economic White House, and the Republicans are loving every minute of it – sweet revenge for having lost the White House twice running.

The central bankers are, once again, in danger of losing control of interest rates and monetary policy, and somewhat bizarrely QE seems to be the new 600-lbs gorilla in the bankers’ parlour, which is now threatening to control them. As I said last week, printing QE largesse is easy, but stopping it is unchartered territory, for which there is no arithmetic.

Is this the new Big Black Hole in Professor Bernanke’s post-retirement thesis - "How I Single-handedly Saved the Global Economy with My Printing-press"? Ending QE is no laughing matter... Just try asking the record 20.2 per cent of US households stuck on food stamps.

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This piece first appeared on Spear's Magazine

Ben Bernanke. Photograph: Getty Images

This is a story from the team at Spears magazine.

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Rising crime and fewer police show the most damaging impacts of austerity

We need to protect those who protect us.

Today’s revelation that police-recorded crime has risen by 10 per cent across England and Wales shows one of the most damaging impacts of austerity. Behind the cold figures are countless stories of personal misery; 723 homicides, 466,018 crimes with violence resulting in injury, and 205,869 domestic burglaries to take just a few examples.

It is crucial that politicians of all parties seek to address this rising level of violence and offer solutions to halt the increase in violent crime. I challenge any Tory to defend the idea that their constituents are best served by a continued squeeze on police budgets, when the number of officers is already at the lowest level for more than 30 years.

This week saw the launch Chris Bryant's Protect The Protectors Private Member’s Bill, which aims to secure greater protections for emergency service workers. It carries on where my attempts in the last parliament left off, and could not come at a more important time. Cuts to the number of police officers on our streets have not only left our communities less safe, but officers themselves are now more vulnerable as well.

As an MP I work closely with the local neighbourhood policing teams in my constituency of Halifax. There is some outstanding work going on to address the underlying causes of crime, to tackle antisocial behaviour, and to build trust and engagement across communities. I am always amazed that neighbourhood police officers seem to know the name of every kid in their patch. However cuts to West Yorkshire Police, which have totalled more than £160m since 2010, have meant that the number of neighbourhood officers in my district has been cut by half in the last year, as the budget squeeze continues and more resources are drawn into counter-terrorism and other specialisms .

Overall, West Yorkshire Police have seen a loss of around 1,200 officers. West Yorkshire Police Federation chairman Nick Smart is clear about the result: "To say it’s had no effect on frontline policing is just a nonsense.” Yet for years the Conservatives have argued just this, with the Prime Minister recently telling MPs that crime was at a record low, and ministers frequently arguing that the changing nature of crime means that the number of officers is a poor measure of police effectiveness. These figures today completely debunk that myth.

Constituents are also increasingly coming to me with concerns that crimes are not investigated once they are reported. Where the police simply do not have the resources to follow-up and attend or investigate crimes, communities lose faith and the criminals grow in confidence.

A frequently overlooked part of this discussion is that the demands on police have increased hugely, often in some unexpected ways. A clear example of this is that cuts in our mental health services have resulted in police officers having to deal with mental health issues in the custody suite. While on shift with the police last year, I saw how an average night included a series of people detained under the Mental Health Act. Due to a lack of specialist beds, vulnerable patients were held in a police cell, or even in the back of a police car, for their own safety. We should all be concerned that the police are becoming a catch-all for the state’s failures.

While the politically charged campaign to restore police numbers is ongoing, Protect The Protectors is seeking to build cross-party support for measures that would offer greater protections to officers immediately. In February, the Police Federation of England and Wales released the results of its latest welfare survey data which suggest that there were more than two million unarmed physical assaults on officers over a 12-month period, and a further 302,842 assaults using a deadly weapon.

This is partly due to an increase in single crewing, which sees officers sent out on their own into often hostile circumstances. Morale in the police has suffered hugely in recent years and almost every front-line officer will be able to recall a time when they were recently assaulted.

If we want to tackle this undeniable rise in violent crime, then a large part of the solution is protecting those who protect us; strengthening the law to keep them from harm where possible, restoring morale by removing the pay cap, and most importantly, increasing their numbers.

Holly Lynch is the MP for Halifax. The Protect the Protectors bill will get its second reading on the Friday 20th October. 

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