Bank of England recognizes that to issue more money is the solution

On October 7 2011 we wrote in this blog that the solution for the financial crisis is to issue more money and not reducing the public spending; some weeks before, we published several essays on the same theme; the titles of the works are: a) Fiscal deficit and Size of the Economy (September 19 2011), b) The Monetary Policy is a Key Element to Reduce the Poverty and Achieving Wellbeing (August 27 2011), c) The Solution is to Realize that the Economy Operates in a new Scale and not Reducing the Public Spending (August 15 2011), d) Why the Debt Is Not a Problem For The United States, An Answer in 150 Words (July 25 2011), and e) Money is Only Metal and Paper without Intrinsic Value, Philosophy of Money (July 26 2011).

In those essays we demonstrated some things: a) That money is a simple instrument to guarantee the interchange of goods and services in all the economies, b) That, in consequence, money does not has intrinsic value, c) That nations have sovereign capacity to issue their national currencies, d) The U.S. dollar is the international currency of interchange, e) The availability of U.S. dollars is limited to the size of the international reserves of each country and to the size of the international commerce of each nation, and that f) The countries that adopted the euro resigned to its sovereign capacity to decide its monetary policy and this is the main cause of the current financial crisis.

Well, yesterday Tuesday October 25 2011, the Governor of the Bank of England, Mervyn King, explained to the Parliament in London the reasons of the institution to inject £ 75 billion (86,000 millions of euro) into economy through quantitative easing (QE), only this month; a biggest amount was pumped before. In other words, the Bank of England is issuing new money to guarantee the economic development and to avoid the recession. Yesterday, the Governor of the Bank defended the mentioned policy, which was successful in the past.

England could adopt this financial measure because she keeps its monetary sovereignty and maintain valid its national currency, the Pound Sterling. The other members of the Euro Zone like Greece, Spain, Portugal and Italy cannot take sovereign monetary decisions because they are tied by the European Central Bank, the European Community and the International Monetary Fund; therefore its unsolved crisis, which will be more severe in the next weeks when these countries intensify the restrictions against the population.

For the mentioned countries there is not other option than to abandon the euro and comeback to their national currencies. That is the unique way to attend the internal needs of their populations and to avoid a deep and long recession.

It is very likely that the governments of those countries will not stay in the power. The orthodox formulas of economic restrictions are not right; they are a big mistake. On the contrary, the solution for the crisis is the monetary expansion; that is the way to reach the social and economic prosperity.