How much QE?

Thrugelmir

fiish wrote: »

I think the BoE will just have to keep going (perhaps slowing down but not stopping) until it becomes clear that it is having an effect on the real economy. It would take a few more months for this additional £50B to get through the financial system.

I think the total might get as far as £250B by mid 2010, by then we should be able to see much more clearly the effects of this exercise. I think there would be hesitation about going much further than that amount if it works, as inflation concerns would be greater.

With the banks short on capital. Inflation in the short term may no longer be an issue (unless oil & gas prices spark off). As the banks may keep the cash generated by QE to balance their books rather than lend it out. At the moment QE seems like pouring concrete in to a bottomless pit. Debt levels will have to fall to turn the economy round. Something BOE would prefer inthe medium term one suspects.

Really2

mewbie wrote: »

Its an interesting "hole in my bucket" theory of plugging a debt hole by borrowing (printing) money.

I know "something must be done" but I think ten % of the billions used as a more direct stimulus (build something, manufacture something) would have been more obviously useful than a kind of incestuous propping up of banks and buying government bonds.

If you don't fill the deflationary hole, the hole gets bigger making all assets lower in value.
Which in turn then affects the banks balance sheets.

I don't think it is a theory, QE is to stave off/reduce deflation.

lemonjelly

Given Merv's recent comments, I'm not sure we'll get any more QE this year.

QE has to be balanced. The recent extra £50bn suprised me, I thought they'd monitor what they'd already done & look at the effects.