Jump to content
House Price Crash Forum

Where To Put Qe?


Recommended Posts

Can anyone enlighten me as to why QE goes into the banking system and not directly into projects to creat jobs and infrastructure.

The theory is that it is used by the Bank of England to buy up government debt normal held by the private sector (pension funds etc.). The private sector cash is freed up so that it should then be lent to the corporate world thus stimulating companies to invest and create jobs etc.

For government sponsored infrastructure, in theory the gov should be able to borrow from the private sector again and then create infrastructure but the current government policy is not to as there is a belief that Britain has borrowed enough.

It just seems that we are at the point where nobody wants to do anything so we are stagnant until people feel confident again - probably in about 10 years time!

Link to post
Share on other sites
  • 3 weeks later...

Hi, could someone help explain something for me regarding QE?

So the Bank of England is using 'electronic' money to buy back government bonds from private companies, mostly British banks and hoping that the money these private banks then have will enter the wider economy through mortgage lending etc.

My question is why the government even sells bonds in the first place, could it not use this electronically created money to fund services taxes do not cover? Or is the government having to borrow money from the money markets to fund QE? :blink:

I have watched the below video regarding QE and struggle to grasp this point.

Any help would be much appreciated. :)

Link to post
Share on other sites
  • 4 weeks later...

Hi, could someone help explain something for me regarding QE?

So the Bank of England is using 'electronic' money to buy back government bonds from private companies, mostly British banks and hoping that the money these private banks then have will enter the wider economy through mortgage lending etc.

My question is why the government even sells bonds in the first place, could it not use this electronically created money to fund services taxes do not cover? Or is the government having to borrow money from the money markets to fund QE? :blink:

I have watched the below video regarding QE and struggle to grasp this point.

Any help would be much appreciated. :)

How can you control the quantity, value and interest rate paid to a currency base if you, as a central bank, do not have a marketable asset to sell into the market to remove that quantity of money from the system (the same money you created when you bought it).

Spending new money without obtaining a stock of assets that you can sell to control the amount of this created money - and additionally income producing assets to pay an interest rate on this currency - debases the currency.

Edited by Police
Link to post
Share on other sites

How can you control the quantity, value and interest rate paid to a currency base if you, as a central bank, do not have a marketable asset to sell into the market to remove that quantity of money from the system (the same money you created when you bought it).

Spending new money without obtaining a stock of assets that you can sell to control the amount of this created money - and additionally income producing assets to pay an interest rate on this currency - debases the currency.

Thank you for your explanation. :)

When we talk about government debt (the £1 trillion amount) , then, are we only talking about these gilts/bonds? If so I assume we wouldn't have to worry as the government would have an equivalent amount of assets it has bought using these gilts which it could sell.

Link to post
Share on other sites
  • 4 weeks later...

Thank you for your explanation. :)

When we talk about government debt (the £1 trillion amount) , then, are we only talking about these gilts/bonds? If so I assume we wouldn't have to worry as the government would have an equivalent amount of assets it has bought using these gilts which it could sell.

What, like RBS shares? :lol:

Or is the government having to borrow money from the money markets to fund QE?

It effectively prints it. The bank of england is not allowed to purchase newly issued gilts (google primary issuance) so what it does is buy them from private holders... who then go out and replace them by buying the newly issued ones. The net effect is that the money created by the BoE gets to be spent by the government, with a cut taken out by the financial services in the middle.

It also artificially raises demand, and therefore keeps the interest rate on gilts down.

Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
  • Recently Browsing   0 members

    No registered users viewing this page.



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.