"I have spent the last year trying to find this money, if only because it seemed rather a lot – more than an entire annual take from income tax, VAT and corporation tax together. I have asked bankers, regulators, commentators, economists, and even trotted round to the Bank of England. Ask any of them after the £325bn and they stare at the ceiling or look at their shoes. Nobody knows. The money appears in no statistic of cash in circulation or on deposit. Bank balances have not altered. Demand has not risen. Production has not expanded.
Such professional and intellectual gullibility on a matter of national salvation is staggering. When Alistair Darling, as Labour chancellor, "pumped in" £75bn, he said it would stave off recession. George Osborne, then shadow chancellor, derided it as "the last resort of desperate governments", and Vince Cable said Britain was going down the road to Harare and hyperinflation. Yet when these two men came to power, they were overnight converts. They became zombie puppets of the Bank of England and its boss, Sir Mervyn King.
We know what QE is supposed to do. The Bank "buys back" the government bonds (or gilts) that were previously sold to banks. Since gilts are as good as cash, this merely replaces an interest-bearing bond with actual cash on the asset side of a bank's balance sheet. It is a paper transaction, moving sums from the bonds column to the cash column.
In theory, the banks have an interest in lending that cash at a profit to the public, or to companies. But that depends on buoyant demand and on finding businesses and individuals whose credit is secure. This is not the case when demand is stagnating. In addition, the banks are sitting on bad debts that need covering, and regulators are telling them to keep higher cash reserves. The banks duly sit on the cash or use it to buy more gilts. The money goes round in circles, collecting fees. It is like Irish truckers moving goods back and forth over the Northern Ireland border, picking up European Union bungs each time they pass customs."
Source: Mervyn King has turned our leaders into zombie puppets | Simon Jenkins | Comment is free | The Guardian
There is no growth from QE because it's there to fund current Govt spending, this probably limited effect on inflation but long term if investors in gilts don't get proper returns they would not be putting their money into Govt bonds. Hence chances are QE (AKA money printing) will be regular feature regardless of whichever muppet of the day for voted into Govt.
Such professional and intellectual gullibility on a matter of national salvation is staggering. When Alistair Darling, as Labour chancellor, "pumped in" £75bn, he said it would stave off recession. George Osborne, then shadow chancellor, derided it as "the last resort of desperate governments", and Vince Cable said Britain was going down the road to Harare and hyperinflation. Yet when these two men came to power, they were overnight converts. They became zombie puppets of the Bank of England and its boss, Sir Mervyn King.
We know what QE is supposed to do. The Bank "buys back" the government bonds (or gilts) that were previously sold to banks. Since gilts are as good as cash, this merely replaces an interest-bearing bond with actual cash on the asset side of a bank's balance sheet. It is a paper transaction, moving sums from the bonds column to the cash column.
In theory, the banks have an interest in lending that cash at a profit to the public, or to companies. But that depends on buoyant demand and on finding businesses and individuals whose credit is secure. This is not the case when demand is stagnating. In addition, the banks are sitting on bad debts that need covering, and regulators are telling them to keep higher cash reserves. The banks duly sit on the cash or use it to buy more gilts. The money goes round in circles, collecting fees. It is like Irish truckers moving goods back and forth over the Northern Ireland border, picking up European Union bungs each time they pass customs."
Source: Mervyn King has turned our leaders into zombie puppets | Simon Jenkins | Comment is free | The Guardian
There is no growth from QE because it's there to fund current Govt spending, this probably limited effect on inflation but long term if investors in gilts don't get proper returns they would not be putting their money into Govt bonds. Hence chances are QE (AKA money printing) will be regular feature regardless of whichever muppet of the day for voted into Govt.
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