Bank of England pumps further £50 billion to the economy; total stimulus £375 bn
The Bank of England has announced on Thursday it will pump a further £50bn into the UK economy over the next four months through its quantitative easing (QE) program to try to help the economy.
QE aims to boost the economy by buying bonds. The latest increase will take the total stimulus to £375bn. The Bank also said it would leave UK interest rates unchanged at a record low of 0.5%.
The Bank of England's Monetary Policy Committee (MPC) has held rates at 0.5% for more than three years.
The Bank said that the UK economy, which is back in recession, had “barely grown for a year and a half”. It added that growth in export markets had also slowed. The Euro zone debt crisis was “weighing on confidence here”, it said.
Without an increase in QE, the Bank said there was a danger that inflation would fall below its target rate of 2%. Inflation as measured by the Consumer Price Index currently stands at 2.8%, down from 5.2% in September last year.
The additional stimulus had been expected following last month's MPC meeting, when four of the nine members voted to increase QE.
Since then, the UK economy has shown no real signs of recovery. A series of surveys released this week suggested that both the manufacturing and construction sectors had contracted in June, while growth in the service sector had slowed to an eight-month low.
Last month, the Bank announced two new stimulus measures. The first of these will provide banks with access to tens of billions of pounds of cheap credit on the basis that they lend this on to businesses.
The second provides banks with access to cash, should they encounter any short-term funding difficulties.
Analysts suggested there could be further stimulus measures on the way as the Bank tries to kick-start the UK economy, which shrank by 0.3% in first three months of this year and by 0.4% in the final quarter of 2011.
”We think it is the next step in a series of measures they are set to undertake over the next 12-18 months”, said Adam Chester at Lloyds.
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Throwing money to 'stimulate' the economy is distorting the market and only Mr. Market will decide what happens to the market.
Once this added burden of debt is finally stopped the market will collapse to what Mr. Market thinks is the 'correct' level. And taxpayers in the UK such as me and my family will be left with the debt while King retires on his inflation linked pension, paid for by the taxpayers (me and my family again).
Everything that the USA (with the Fed) and the UK (with the BofE) and the EU (with the ECB) in 'supporting' the market will come to nothing: they are just delaying the inevitable reckoning which WILL happen, it always does.
Only correctly functioning economies with a thriving export element will grow in the manner they should. Being efficient in production in order to take on other eceonomies is the key. So that is Britain in serious trouble.
What is quantitative easing?.......
”The smart new term for printing money,
although these days that extra cash isn't produced in the form of newly minted coins and bank notes.
Rather, quantitative easing (QE) involves electronically expanding a central bank's balance sheet.
So under its Asset Purchase Facility, similar to that used by the US Federal Reserve, the Bank of England will now buy directly from commercial banks “high-quality assets, broadly comparable to investment grade”.
These will range from fixed-income sovereign debt and corporate bonds to 'asset-backed' securities built on property loans.
On the flipside, the Bank will also sell fewer of its own IOUs – gilts – to institutions such as pension funds.
The two measures combined should release extra liquidity into the economy.”
I think I understand. Whatever it is, it's not doing my pension much good.
Not if you believe the BofE. Almost 'investment grade': it's a bit like almost being pregnant. Weasel words to say the least and Geoff and I are paying with the taxes on our pensions to pay for this QE.
But isn't that exactly what you are accusing Argentina of doing?
3 people commenting on this thread, had it been Argentina on the headline, I can assure you a lot more activity :)
:D...ahh, Geoff is a waken.
QE (1,2, 2.5 < operation twist, ) : Print (digital) money that isn't worth the paper it's print on, and buy back the worthless derivatives that are on the banks (hidden, shadow banking) balance sheets and forward the costs towards the people (austerity measures).
Derivatives are financial weapons of mass destruction.
~Warren Buffet~
I take it you are reffering to Buffets' message to shareholders on 3 Mar 2003?
I f so, please read it through and you will see that he foresaw the CONSOLIDATED derivitives problem. This was the famous bundling up of mortgage contracts into one big forward buy derivitive. Problem was Obarmy, when he was a Senator, pushed through the bill that enforced the 'two fannys' to loan to deliquents (mainly black of course) who were conned into the subsidized mortgages. Once the subsidy came off the poor devils found they could not afford the payments hence the disaster.
The derivitives alluded to by the BofE are not of that type but it is still bad news from a debt concept.
print, print, print, print...
Eventually it will catch up to even the nimbus-laden UK.
Guzz is completely correct, this is no different than what Argentina is doing. The only difference is the UK has the confidence of international investors and it is betraying it with all this fiat money.
Tobias. Let us say that what the British BofE is doing is what the Argentinian government is doing, there is still a really, really big difference.
Bet you know what is coming know don't you?
Yes, we don't renege on our obligations and our international investors know that, just as you know that. :o)
google “UK stealth default”.
And there is always a first time, in everything in life. The UK can't repay its debts, nor can Europe or the USA. Too many years of sacrifices since lets remember, it took DECADES of overspending to arrive here. And it is much easier to overspend 2 pounds than to save just 1, because of the social instability that brings.
So to undo decades of debt, we are talking about at least double the that time to reign it in.
NO CHANCE.
Eventually you all will default, and unlike Argentina, you will have betrayed the trust of the investor.
I cannot remember the year that the UK paid back America for the 'Lease - Lend' armaments and other goods and food we used during WW2, but it was about 1964.
Up until then I had no idea we were paying it. Like many people, the way the Yanks were grand-standing as to how 'they had helped us out' all the while sitting in safety while 'free' Europe fought on their behalf I naturally thought we did not have to pay for it (I was only 16 of course).
It was an immense amount of money, and yes, we went without as a country to pay it back: but we did. I have every confidence a solution will emerge that does not require the UK or Germany to default.
I do think that the USA will no longer have the Dollar as the principal reserve currency before much longer if the Chin have anything to do with it.
So while such sacrifices may have been possible then, just based on that lifestyle change it would be far more difficult.
There is an additional problem that is the back breaker: Europe, the USA and the UK are much older nations demographically: whereas in the 1950s you may have had one over 65 for every 8 working people, now that is down to 1 to 3 or even less.
The combination of a far greater pensionist pool, a much smaller working pool, and longevities that make that retireee pool demand far more medical resources, the numbers just don't add up.
It is for all the reasons above that I predict bankrupcy. You may have the will, but you don't have the means.
There are some excellent points in what you say and the pension burden from the Ponzi Scheme that is the UK governments (among others) way of doing things and medical care for the aged does adversely affect our ability to pay significant amounts of debt down. But it does not stop our payments.
My own personal pension is not a Ponzi Scheme and 'should' help alleviate my burden to the state. Also, retiring to Uruguay (and a lot of people are moving from the UK for all sorts of reasons) removes my medical dependency on the UK.
I do hope your prediction does not come true, just like I sincerely hope that the genuine people of Argentina manage to throw the present government out of power sooner, rather than later.
Another factor to add to the equation is the one about birth rate.
In Europe it is about 1.6, when 2.1 is needed to upkeep the population.
1.6 included the non-European immigrants (you know, the ones that tends to have 4+ kids)
There are no numbers on the birth rate not counting the non-European immigrators, but they are quite many, and I would be generous if I'd say the rate would be at 1.2-1.3...
That would mean the European population (of European origin) would be almost halved for every generation...
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