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Buggered if I understand it
Aug. 6th, 2009 01:15 pmSo, the Bank of England decides to extend Quantitative Easing by another £50bn, against almost unanimous advice. Then again, perhaps this should not be a surprise, because it does have a track record of being a few months behind the curve. It's final raising of interest rates was seen as a hike too far. This is probably a boost too far.
Not that it bothers me (se previous post on this matter a couple of days ago). Its impact will be to keep interest rates lower for longer, but the eventual kick to inflation will be that much harder. On the plus side, sterling dropped a couple of cents fairly quickly, although it's a long way still from the $1.45 to $1.55 range that I have pencilled in as the level where I go back to taking out dollars as spending money rather than pounds.
Apart from fuelling future inflation, the increase in QE also boosts the stockmarket (once again, see post a couple of days ago for the reasoning) and the banks' operating profits.
That's fairly boring, so I think we should have a more interesting system.
The £50bn should be handed out in 100,000 chunks of £500,000 to UK families at random, with the sole condition that they have to spend the money, in the UK, within a week. Houses don't count. And they could make a television series out of it, with Dale Winton, Robert Peston and Cheryl Cole as commentators. Hell, that would make it almost self-funding.
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Not that it bothers me (se previous post on this matter a couple of days ago). Its impact will be to keep interest rates lower for longer, but the eventual kick to inflation will be that much harder. On the plus side, sterling dropped a couple of cents fairly quickly, although it's a long way still from the $1.45 to $1.55 range that I have pencilled in as the level where I go back to taking out dollars as spending money rather than pounds.
Apart from fuelling future inflation, the increase in QE also boosts the stockmarket (once again, see post a couple of days ago for the reasoning) and the banks' operating profits.
That's fairly boring, so I think we should have a more interesting system.
The £50bn should be handed out in 100,000 chunks of £500,000 to UK families at random, with the sole condition that they have to spend the money, in the UK, within a week. Houses don't count. And they could make a television series out of it, with Dale Winton, Robert Peston and Cheryl Cole as commentators. Hell, that would make it almost self-funding.
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