Shall we print more money? Yes, says the BoE

BillieTheBot

According to the Beeb: "The Bank of England is to create £75bn of new money in an attempt to revive lending and the battered economy. Bank Governor Mervyn King said the policy - called quantitative easing - was about pumping money into the wider system rather than simply to the banks. He said the approach would 'eventually work' but admitted it was unknown how long it would take to have an effect."

A quick note: strictly speaking, they're not actually going to print any real money following this. My understanding is that this £75bn is going to be used to buy up mostly government debt, which is at eye-wateringly high levels now. Essentially, it's electronic money but it has the same effect as printing money would do. At least that's my understanding of the issue. If I've got this wrong, please do tell me - economics isn't my strongest card.

I'm simply not conviced that this is the solution to our economic problems. I was watching Working Lunch on BBC2 yesterday and I saw an analyst saying that very little of this money will actually trickle down the system. The problem at the moment is that banks aren't operating in their normal way - and this will do virtually nothing to help that. Giving money to people at the top of society and hoping it will trickle down to everyone else has never worked in the past, and it will not work this time.

The only thing that can get the economy going right now is massive tax cuts. Give people more money to pay off their debts, to spend on whatever the hell they like, or even to save for a rainy day. (though they'll admittedly get bugger all interest on their dosh) I've also seen it suggested elsewhere that everyone is given a month off from paying any Income Tax whatsoever on their wages - but depending on who you are, that could either save you a fortune or nothing at all.

I think that comparisons with Robert Mugabe's Zimbabwe - where inflation is so high that they don't even bother counting it anymore, and the currency is completely worthless - are rather far off the mark. Even so, I'm terrified that this is going to make things even worse than they already are.

Over to the masses.

Former Member

JsT

Even if the banks do lend the money out or around it'll have a minimum impact. With all the banking problems with lower profits etc recently I wouldn't be surprised if many banks try and hold on to as much of this cash as possible to save themselves.

Former Member

Some of this will be used to buy corporate bonds, and that is where is will have the most impact, it will in reality mean that the Bank of England will be stepping in as a commercial lender to companies. If they did that on a moderately large scale then you would see companies more willing to expand, and therefore the economy moving upwards.

I dont think just throwing money at the banks is going to do a great deal at this stage.