MSE News: Bank of England holds base rate and pumps £75bn more into economy

Former_MSE_Guy
Former_MSE_Guy Posts: 1,650 Forumite
I've been Money Tipped! Newshound! Chutzpah Haggler
in Savings & investments
This is the discussion thread for the following MSE News Story:

"The Bank of England today announced it is holding the base rate at its 0.5% historic low for the 31st consecutive month and is printing more money ..."
Read the full story:
Bank of England holds base rate and pumps £75bn more into economy

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This thread is not in the 'discuss house prices and economy board' as that is only open to those logged into the forum so anyone coming from the news story may not be able to see it.
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Comments

  • oldvicar
    oldvicar Posts: 1,088 Forumite
    Seems to me that QE is in danger of being a bubble.

    May the gods help us when it bursts.
  • Cardozo
    Cardozo Posts: 65 Forumite
    Will/Has this cause/caused any change to the Euro to Pound Exchange rate? If so, how much of a change?
  • oldvicar
    oldvicar Posts: 1,088 Forumite
    Cardozo wrote: »
    Will/Has this cause/caused any change to the Euro to Pound Exchange rate? If so, how much of a change?

    With acknowledgement to Sceptic001, who posted this on another thread:
    The British Pound has declined heavily against all of the 16 most actively traded currencies this lunchtime, falling over 1% against the Euro and the Dollar in under a minute, as the Bank of England announced that it would resume quantitative easing and purchase government bonds to the value of £75 billion," says exchange rate analyst Adam Solomon at foreign exchange specialists TorFx.
    http://www.economy-news.co.uk/britis...ears-343545345
  • oldvicar
    oldvicar Posts: 1,088 Forumite
    With the latest round bringing the QE total to £275,000,000,000.00 then the Bank of Enland has printed money totalling:
    • Over half the overspend of the Labour administrations between 1997 - 2009 (if you accept David Cameron's conference speech figure that they spent £400-500 billion we didn't have)
    • 20% of the national debt. I think the last I heard it was £1.3trillion, but its probably gone up again
    The Old Lady seems to be printing enough to almost cover the government's annual deficit themselves. Which is very handy.
  • oldvicar
    oldvicar Posts: 1,088 Forumite
    Sorry to hog the thread but just to stir things some more isn't the title of the thread wrong?

    The BoE hasn't 'pumped' a single penny into the economy. It's bought itself some government debt, but then so do I when I buy a premium bond.
  • pqrdef
    pqrdef Posts: 4,552 Forumite
    oldvicar wrote: »
    The BoE hasn't 'pumped' a single penny into the economy. It's bought itself some government debt, but then so do I when I buy a premium bond.
    Tried that, but they seemed to think I should have some money I could give them in exchange for the premium bonds.

    I told them money is only a concept, so I create it by thinking about it, but they hung up.
    "It will take, five, 10, 15 years to get back to where we need to be. But it's no longer the individual banks that are in the wrong, it's the banking industry as a whole." - Steven Cooper, head of personal and business banking at Barclays, talking to Martin Lewis
  • oldvicar
    oldvicar Posts: 1,088 Forumite
    pqrdef wrote: »
    Tried that, but they seemed to think I should have some money I could give them in exchange for the premium bonds.

    I told them money is only a concept, so I create it by thinking about it, but they hung up.

    Ha Ha! I get that, but is the economy more 'pumped' by the BoE buying up gilts with funny money than by say the Chinese buying them with some they printed?

    Not that I advocate it, but to 'pump' the economy doesn't the BoE either need to offer its funny money to enterprise, or the government needs to spend even more?

    I will equally argue that more QE = higher inflation (or a 'pumped' economy?) so I guess I really have no idea at all ! Maybe some other experts (in addition to pqrdef) will come along in a minute and make it all clearer
  • Ifts
    Ifts Posts: 1,951 Forumite
    First Anniversary First Post Combo Breaker Name Dropper
    Saw this article on the ThisisMONEY.co.uk website:

    QE Q&A: What is quantitative easing and does it work?

    Read more: http://www.thisismoney.co.uk/money/news/article-2045943/QE-Q-A-What-quantitative-easing-does-work.html#ixzz1a13cQEBh
    Never let the perfume of the premium overpower the odour of the risk
  • oldvicar
    oldvicar Posts: 1,088 Forumite
    Ifts wrote: »
    Saw this article on the ThisisMONEY.co.uk website:

    QE Q&A: What is quantitative easing and does it work?

    Read more: http://www.thisismoney.co.uk/money/news/article-2045943/QE-Q-A-What-quantitative-easing-does-work.html#ixzz1a13cQEBh

    I enjoyed reading the article and found it informative.

    I ESPECIALLY enjoyed reading the comments the article has generated so far ;)
  • sabretoothtigger
    sabretoothtigger Posts: 10,035 Forumite
    First Post Photogenic Combo Breaker First Anniversary
    I think the point is the 75bn doesnt exist anywhere. They just devalued the sterling pound and gave the money to government. If you own or earn sterling then you just got poorer though it wont register exactly until government gives money to its employees. The other way it will show up more rapidly is if people sell government bonds, nobody is really selling yet but when they do that new money will create higher prices
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