BelfastVI, on 15 February 2013 - 11:20 AM, said:
There are debates on that. QE on its own, IMHO has failed to stimulate the economy. It has strengthened the balance sheets of the banks. To stimulate the economy they need to create employment and spending. They will also need either QE or borrowing to do this. To date all they have done is borrow and QE. they havnt went on the infrastructure drive that most other counteries have done in the past. They are still sticking with Plan A.
Treasury attempts to boost lending have 'failed', MPs say
Treasury has put taxpayer 'at risk' with QE
The Treasury has put billions of pounds of taxpayer money at risk by sticking state guarantees on “a series of expensive experiments” that it does not fully understand, an influential group of MPs has warned.
The Public Accounts Committee (PAC) claimed the Chancellor’s department does not have any clear goals for either the Bank of England’s £375bn quantitative easing (QE) programme or its £80bn Funding for Lending scheme (FLS), both of which are backed by the taxpayer, and had no means of monitoring their progress.
Margaret Hodge, chair of the committee, said: “The Treasury has not convinced us it understands either the risks it has taken on by indemnifying the Bank against losses on QE or the expected economic benefits... The Treasury seems to be embarking on a series of expensive experiments, indemnified with taxpayers’ money.”
The Treasury has resorted to providing guarantees and indemnities in an attempt to drive the recovery without increasing public borrowing. However, such “contingent liabilities” carry a risk of loss as the state has pledged to bear some or all of the downside.
With QE, the taxpayer has fully indemnified the Bank. Under the FLS, high street lenders can swap risky bundles of loans for low-risk Treasury bills. Both schemes were designed to help boost growth, but carry the potential for losses.
“The indemnity creates substantial taxpayer exposure,” the committee said in its report on the Treasury’s 2011/2012 accounts.
Giving evidence to the committee in October, Sir Nicholas Macpherson, the Treasury’s Permanent Secretary, described QE as “an experiment, and we won’t know the ultimate answer for many years”. Although the scheme was in profit in 2011/2012, he warned that there was a risk of losses from QE.
“At some point interest rates will start rising... and at that point you could sustain quite big losses.