Here you go. Propaganda straight from the horses mouth.
http://www.bankofengland.co.uk/monetarypolicy/pdf/qe-pamphlet.pdf
It's all about getting you to spend, so do your part for the economy, go out and buy something manufactured in China.
Cheers NT, been reading it and the transmission mechanism which is the crux of my question / dillemma remains unanswered other than very loosely.
Direct injections of money into the economy, primarily by buying gilts,
can have a number of effects. The sellers of the assets have more money
so may go out and spend it. That will help to boost growth. Or they may
buy other assets instead, such as shares or company bonds. That will push
up the prices of those assets, making the people who own them, either
directly or through their pension funds, better off. So they may go out and
spend more. And higher asset prices mean lower yields, which brings down
the cost of borrowing for businesses and households. That should provide
a further boost to spending.
In addition, banks will find themselves holding more reserves. That might
lead them to boost their lending to consumers and businesses. So, once
again, borrowing increases and so does spending. That said, if banks are
concerned about their financial health, they may prefer to hold the extra
reserves without expanding lending. For this reason, the Bank of England is
buying most of the assets from the wider economy rather than the banks.
The underlined are all maybe's. The reds I can't see taking place. Perhaps things may have been a lot worse so providing liquidity to financial institutions is good on balance. The blue is the only maybe that's visible as bank lending to small to medium businesses is still very patchy if at all.
Few points...
1. It is stated Ms needs to grow to keep pace with the expansion of the economy.
BUT - Increasing the Ms is not the same as increasing the expansion of the economy.
- Time lag & Transmission mechanism.
2. The system to me leans heavily on the wealth effect for consumers to spend. But the more wealthy one is, the less one needs and these people already have what they need. The money needs to be circulated to the have nots.
3. Very little on Monitoring What to Watch? Unless I've got it wrong other than inflation (which further reduces disposable income) I don't see it working.
- This is my main point. The transmission mechanism. Once again other than hoping for a wealth effect there is no transmission mechanism other than the hope corporates and individuals holding rising asset prices will go out and spend.
So we can give as much money as we can to Bankers, Politicians and the Fat Cats but it ain't happening. The skewed distribution of wealth will further screw us all.
The solution is to keep interest rates low and raise taxation and give the money to the low end hard working deprived areas of society. I would be giving wage increases to Nurses and council workers and real grafters of society.
But instead round my streets we have rubbish littered around the streets because 10 x dustmen have been axed to save the councillers jobs at £150K p/a.
Our elite leaders are effed up dumb ass Eton educated ******s who don't know FA about economics.
Look at the US - asking for tax cuts which is precisely how they got here in the first place - the republicans are serious dumb ass red knecks the lot of em.
UK Policy
1. Low interest rates - to stim investment and keep £ low
2. Raise taxation - to stave off inflation
US Policy
1. Raise taxation to pay for debt
2. Cut spending on Pentagon and Nasa for starters.
Pretty obvious really. But people in power and who already have the monies prefer to do the complete opposite.
Once again thank you for the article. I'll watch out for the Ms figures and be interested to find out more about what the BoE is monitoring other than inflation to judge success of QE.
