QE should be by buying equities?

1echidna

Just seen Robert Peston's Blog http://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/03/should_the_bank_of_england_buy.html

Suggestion is that QE should be by buying equities rather than gov't or corporate bonds. Sounds good to me as I have some equity based investments but I see there are wider considerations than that. Any other views?

mvengemvenge

1echidna wrote: »

Just seen Robert Peston's Blog http://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/03/should_the_bank_of_england_buy.html

Suggestion is that QE should be by buying equities rather than gov't or corporate bonds. Sounds good to me as I have some equity based investments but I see there are wider considerations than that. Any other views?

This one?

http://blogs.telegraph.co.uk/edmund_conway/blog/2009/03/12/how_the_boes_printed_money_may_be_falling_into_the_wrong_hands

1echidna

mvengemvenge wrote: »

This one?

http://blogs.telegraph.co.uk/edmund_conway/blog/2009/03/12/how_the_boes_printed_money_may_be_falling_into_the_wrong_hands

Interesting. Somewhat different point though.

Radiantsoul

1echidna wrote: »

Just seen Robert Peston's Blog http://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/03/should_the_bank_of_england_buy.html

Suggestion is that QE should be by buying equities rather than gov't or corporate bonds. Sounds good to me as I have some equity based investments but I see there are wider considerations than that. Any other views?

Problems I see are;-
1. It would be much risker and might increase the cost of governments issuing debt.
2. Political considerations over share ownership(pork barrelling).
3. Weaken private shareholders voice and ability to influence policy.
4. I am not sure it would raise prices all that much as the value of shares should be defined by discounted future dividend payments. I can't see that the government owning shares will effect that. So it is likely to only temporarily raise prices.

In terms of value the government would probably end up owning 5% of the FTSE100 if it invested £75bn.

purch

Plus there is the choice of which Equity to buy, and the knock on effect to the stock of companies chosen, and those not chosen.

Point 4 is well made.

This one?

Another interesting take. I am sure the intention might have been to encourage Pension Funds to join in......but if they are holding Gilts then they are doing so for a reason, so why would they want to exchange their Gilts for Cash ??

Then what would they buy with the Cash....more Gilts ??