Last Update - Sun Oct 20 2024
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Quantitative Easing:Monetary policy in which a central bank, like the U.S. Federal Reserve, purchases securities (e.g government bonds and mortgage backed securities) in the open market to reduce interest rates and increase liquidity i.e money supply.Typically done when interest rates are near zero and economic growth is stalled.The process of reversing QE, either by stopping reinvestments or selling bond, raises interest rates and lowers inflation.
Manchester IV 2022 Semi-Final (Room 1)
CO| OW : Aniket Chakravorty, Hadar Goldberg.
80+
Economics
Introduction
I'm gonna be honest I do this for my degree and even considering that this there was so much competing claims competing assertions and lies in this debate that it's become incredibly messy and hard to consider
Summary of the Speech
given that then i'm just going to talk about two different
cases that occur in this debate firstly if inflation doesn't persist and secondly if
inflation does and why we win on both these accounts
Callout The BURDEN !
Before though i want to do a few notes
A)firstly i want to note on
the burdens in this debate is about proving why this sort of contractionary monetary policy needs to happen right now rather than in the future
1st CLASH
Rebuttal
So all of the things that come from closing government about import
prices etc going up and that potentially being bad and not in this debate insofar as the currency can always appreciate in the aftermath of things like covid or in two to three year periods and they never prove what it needs to happen now that is not something that needs to be considered in this debate
CG’s case can be implemented later in future so it’s irrelevant
2nd Rebuttal
the second thing i would note and this is on their thing about land prices this is just patently absurd right the uk engaged in a policy of austerity and so on and balancing the government budgets in the period between 2010 and around 2015 .So if it was the case the government had this many assets to sell they would have done that already in order to balance their books it's also just factually wrong i don't know where this lie has come from
Using supposedly factually true info to rebut
Austerity : Difficult economic conditions created by government measures to reduce a budget deficit, especially by reducing public expenditure.
2nd CLASH
Scenario 1 : Inflation is not persistent
All right now i'm going to talk about what happens if this uh inflation case is not
actually persistent
CLAIM
because i want to note here that opening government are right, the united kingdom has structural weaknesses on its economy in the form of things like structural unemployment and the form of anemic productivity growth and all of these sorts of things
Example
that's why the 2010s was considered a lost decade but trivially if that's true what that proves is that inflation and this inflationary shock is temporary
The long-term fundamentals of the economy are weak, and this will likely result in a depression of output in the long term. This inflation is primarily caused by an energy price shock, so if truth is worth anything in debating, we are kinda winning here.
The reasons we get from Tin(CG) as to why inflation is persistent are essentially Brexit, COVID, and Ukraine. All of this is wrong:
Brexit happened in 2016. If it were going to cause inflation, it would have been visible prior to COVID but obviously it didn’t.
COVID has been mitigated by increased adaptation to its harms, and the Omicron variant is demonstrably less harmful than previous variants, meaning solutions are already in place.
Ukraine might cause a rise in energy prices, but this can be offset, as Hadar suggests, through mechanisms like energy caps, which the UK government ended up supporting.
Further Refutation
The analysis here, which wasn’t particularly responded to by the previous speaker, is also logically prior to Opening Opposition’s case.
Name Calling CG for not responding and why our top half’s material is depended on our case
Claim
All the benefits they claim, such as you having money to spend and so on, is contingent upon proving on the comparison that fiscal policy would step in.
Analysis
We prove why fiscal policy can’t step in because the only reason why fiscal policy occurs is because of QE and the central bank buying bonds, which then enables the government to borrow more and thus spend.
Sub Analysis
Given this is impossible now and the government is relatively conservative under Rishi Sunak's goal to balance the budget, fiscal policy on the comparative is unlikely to step in.
Weighing
We fill the analytical gap by proving that the only way to ensure people continue to have access to money is through QE. Therefore, we take over them.
POI
Before I continue to discuss whether inflation is persistent, I’ll take a POI from Opening.
POI: “No, alright, I'm just going to keep talking.”
Let’s suppose that inflation is persistent, and let’s say we buy all of these weird reasons coming from GOV about this is actually super long-term and won;t go away in the future. Given that then, I think we want to solve this problem significantly later than we do right now. Why is it the case ?
Why we win even in our worst case scenario (persistent inflation)
Claim If the central bank acts now, it’s essentially irreversible. A few mechanisms Hadar gives here:
Signaling: The idea that once the central bank commits, it is compelled to follow through.
Political Risk: If the central bank does this that means government borrowing is less likely, that means it's taking a massive political risk. So it needs to follow through on that
Sub-Claim/Rebuttal
Additionally, there’s a first-mover disadvantage. Dylan(CG) said in his previous speech that other groups are considering raising their interest rates. This is not true.
Analysis
The Federal Reserve has just said that it might raise interest rates in the future period. The European Central Bank has made no such indications, which is an empirical fact.
Example
But if you want reasons to why other countries are incredibly hesitant .Central bankers are incredibly risk-averse. People like Christine Lagarde who lead these central banks have made a career out of things like expansionary monetary policy and they're incredibly unwilling to do it. They also have really bad experience right because of something called the Taper Tantrum where in 2013 uh the federal reserve tried to raise interest rates then that caused an economic downturn.
Experts like Lagarde (president of EU central bank) are already skeptical
Taper tantrum refers to the 2013 collective reactionary panic that triggered a spike in U.S. Treasury yields, after investors learned that the Federal Reserve was slowly putting the brakes on its quantitative easing (QE) program. The main worry behind the taper tantrum stemmed from fears that the market would crumble, as the result of the cessation of QE.
Impact
So really what that means is the central bank is incredibly reluctant to engage in contractual monetary policy. So what that means then is that when the bank of england does this it will be the first mover who does this sort of policy.
Sub-Claim
What that means then is that the private sector necessarily expects them to commit to it. Because the central bank is essentially pinning its mass on saying you know what we are going to cut these interest rates and so essentially they are forced into doing it for the long term. I would note that then the private sector is going to be incredibly skeptical of the central banks doing this insofar as they see that other economies are not engaging in contractual monetary policy to the same extent.
Private corporations would be skeptical of policy as other neighboring countries aren’t doing it
Hence, if this policy happened in the future it would be a lot easier for central banks. Why is the case?
Mechanism
Because then it can act when other countries are also raising interest rates and so on, in line with the general consensus which is obviously what central banks prefer because it seems much more normal and rational by the private sector and also because it can then raise interest rates to a much greater extent. The signal is more credible in that sense.
3rd Clash
The only reason we get from government teams as to why it needs to act now rather than two or three periods of time if inflation remains high is essentially this idea that “ah if inflation stays high now that leads to some sort of harm”
Paraphrasing gov’s only probable response
but i would know that the harm is very easily reversible insofar as you can then restrict inflation in the longer term and to prevent that from occurring
Weighing
and whereas you have to weigh that very reversible harm to the irreversible harm we get of a potential tipping into a recession at the point in which central banks engage in this policy and so lead to output contracting and fiscal policy being unable to work in the way GOV suggests.
Gov’s case leads to an irreversible harm
Conclusion Look at the end of today i want to be very clear in real life the central bank has not raised interest rates yet because it's waiting and watching to see if this inflation is persistent and only then will act.
No matter how many competitions Tin (Puljić) has won i think that i would much rather trust their judgment than what any single person on gov thinks and i think insofar as central banks hasn't raised interest rates we probably ought to trust him on that very proud to stand as closing opposition.