MSE News: Pensions and savers hit as Bank prints more money

Glen_Clark

To read some comments, including the opening post, you might think its only savers and pensioners that are hurt by inflation caused by QE.
Inflation hurts the poor most of all. The right wing in Britain and America have hit on a sly and crafty way of transferring money from the poor to the rich.
Because they still think the poor have too much money, and the rich don't have enough.

Glen_Clark

2010 wrote: »

http://www.youtube.com/watch?v=PTUY16CkS-k

Thats good, but its the American version. This is the British version: http://www.youtube.com/watch?v=xcldQMF4-vo

JohnRo

Counterfeit money only ever benefits those printing it.

Thrugelmir

MoneySaverLog wrote: »

And how long do they continue to throw more money at a failing solution?

There has to come a time when enough is enough

Then look at the size of the figures being bandied around. Billions of £'s.

May take another decade to resolve.

MrMalkin

jimjames wrote: »

If the govt has too much debt then they get the BoE to buy it up thus reducing the amount of govt debt. So far £375bn based on money the BoE has made up.

If the govt debt can be reduced by such a large amount why aren't they doing it all the time - apart from creating inflation?

The government debt isn't reduced when the BoE buys gilts through QE, it just means the government owes the BoE, instead of whoever owned the gilts before (i.e. the banks, usually).

The idea is that printing money gets you out of a liquidity trap (i.e. where nobody is spending much and interest rates can't be lowered) buy putting more money into the hands of people, who become more likely to spend that money. The famous example is the Capitol Hill Babysitting Co-op: http://en.wikipedia.org/wiki/Capitol_Hill_Babysitting_Co-op#Allegory_for_a_liquidity_trap

The problem is that the QE money is going to the banks who are using it to rebuild their balance sheets, so it's not getting out into the economy where it could do some good. Somebody (i.e. the government) needs to step up and stimulate the economy, but the idiots in Westminster are to busy gutting the public sector to care.

talexuser

And that is the galling thing for the taxpayer. The banks had effectively bankrupted themselves. The printed money masks their balance sheets, but has not grown the economy - project Merlin lending promises have not been fullfilled. Thus we suffer the inflation and interest rates while the banks continue in bonuses and their previous lifestyle (including possible fraud).

Consumerist

jamesd wrote: »

The banks have an effectively unlimited credit facility at the Bank of England.

That didn't seem to stop the run on Northern Rock. The mere fact that NR had asked for support was enough to trigger the run on the bank until government guaranteed customers' savings deposits.

Thrugelmir

MrMalkin wrote: »

The problem is that the QE money is going to the banks who are using it to rebuild their balance sheets,

Majority of gilts are owned by pension funds and insurance companies. So while the money is initially deposited into banks its not theirs directly to lend. As the money may be used for any number of purposes.

SallyG

Polly Toynbee:
"The Bank of England has just shovelled another £50bn quantitative easing into the pockets of the banks, the bourne from which no cash returns, while the British Chambers of Commerce again this week called for the money to go instead to a national investment bank for small business."
Can anyone tell the Bank of England not to do QE?
No taxation without representation.

Thrugelmir

SallyG wrote: »

Can anyone tell the Bank of England not to do QE?

Take to long to set a bank up of sufficient size.

The economy is struggling. More debt isn't the answer to kick start it. Productivity is.