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Author Topic: Is Quantitative Easing only helping the banks?  (Read 8201 times)

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The Prophet

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Is Quantitative Easing only helping the banks?
« on: December 14, 2011, 12:11:34 pm »
Quantitative Easing, (QE) money printing by the Bank of England to increase the money supply is really only helping the banks.

In buying back its own bonds, the BoE is effectively making the price of UK bonds artificially high (by creating a demand) and reducing the yield on the bonds (as a percentage of the higher bond price), keeping the interest rates on Britain's debt at low levels.

In turn the banks that sell the bonds back to the government are using this extra money supply to buy equities which increases the price of shares.

Long-term, none of this will benefit the economy or increase growth.

What we should be doing is using QE to fund infrastructure projects and much needed new housing.
This will get people off benefits and into work paying taxes - paying back the QE.
These new projects will help many industries grow, from the material manufacturers to the road haulage companies delivering the materials and the garages maintaining the haulage vehicles. 
All these people employed and paying taxes and spending money on consumption and sustaining the economy.

What we have now is a policy designed to keep the less well-off worse off, increasingly punishing inflation hurting those with modest savings, whilst maintaining and supporting a rich banking elite that caused the crisis we are now in.