Help - I just dont get this money printing malarkey

harrup

Ok, fine. I admit it.

I don't understand HOW printing more money will help the economy. Freely admitting that this seemingly daft/ignorant question will win me the covetted "fruitloop of the week" award.

I read through the papers, I perused this forum - but I just don't seem to get any clearer on it. I DO grasp how such an action could easily lead to inflation. But I'm still hopelessly nebulous on how exactly printing more money will help anything. Some kind of mental block, obviously.

We aren't short of bank notes, are we? The bank/government isn't giving the money away for free for us to lustily spend - so HOW exactly will it help the economy?

Can anyone explain this in simple terms?

Austin_Allegro

OK I might have got this very wrong but as I see it it's not 'printing money' as such, it's the buying of toxic assets from banks by the BOE.

Ie, a bank's owed £1m by some company that's gone bust and can't repay, so instead of writing it off, BOE takes on the debt and gives the bank £1m in cash.

Result: an extra £1m in cash washing around where there shouldn't be, which devalues the currency, because that £1m has already been spent on other things.

The idea however is that it boosts trade, in the short term anyway because the bank now has £1m to lend out that it didn't before.

I suppose it's like CPR on an elderly heart attack victim. Potentially lethal if done wrongly or too much, but it might just keep them alive a bit longer if nothing else works.

Maz

You're not on your own, I don't get it either! Try as I might!

Hopefully some kind, patient person will be along soon to explain it all.....

Heyman_2

This question is currently being asked on this forum once every hour! :rolleyes:

We could really do with a Sticky on this one....