Judging the impact of QE
The BBC carries this interesting video discussion with De Anne Julius about the impact of the Bank’s Quantitative Easing programme designed to support demand and lending in the UK economy. She emphasises the importance of gradually withdrawing the QE programme and she argues that the main effect of QE so far has been to hold down the interest rate on government debt (gilts) but that there is little evidence so far that QE has enabled a rise in lending to consumers and small businesses. The Indy’s Big Question looks at QE in their edition today.
read more...»Cause and effect of the weakness of sterling
I do recommend this 4-minute interview to help explore the reasons for the weakness of sterling and whether it is helping the UK economy. Mark Thompson , a dealer at Moneycorp, was interviewed on Radio 5’s ‘Breakfast’ programme, and explained the shocks to the economy caused by the use of Quantitative Easing and the negative bank deposit rate (which means that if banks choose to hold money on deposit with the Bank of England it actually costs them money, rather than gaining them a return as interest). He sees these as strong statements that had been deliberately used to depress the value of the pound on the currency markets, thus encouraging exports and raising the price of imports, so that there is a substitution effect towards home-produced goods, which we can see is reducing the negative trade balance and so helping to raise the level of AD.
The link here will take you to the Friday 25th September episode of the programme, and should remain live until the end of this week; I think that after that it will be unavailable. Once you have opened the i-player page, use the scroll bar below the ‘control panel’ to move forward through the programme to 1 hour 48 minutes, which is the start of the interview.
China’s concern over US monetary expansion
As the US effectively prints more money, Chinese officials are expressing concern over the impact that this will have on their economy
read more...»Japanese unemployment rises to record high
Japan may have edged out of technical recession in recent weeks but deflationary pressures continue to bear down on their economy.
read more...»Gilt trip - how the government raises cash
This brief “Industry Speak Explainer” from the Guardian provides a vsimple explanation of how the government borrows money by selling gilts. It explains how the Bank of England’s policy of quantitative easing, which involves buying up to £75bn of gilts in an attempt to drive up their price and push down the yield, is an attempt to avoid crowding out by persuading investors to sell gilts back to the Bank and spend the cash on other assets instead, helping to drive up their prices, reduce the cost of borrowing, and stoke new demand across the economy.
Bonds and the Bank
The decision by the Bank of England to become a big purchaser of government bonds through the tactic of quantative easing is already starting to have an effect on the gilt market and on government bond yields.
Quantitative easing explained by a super interactive resource
An excellent interactive graphic from the FT explains how quantitative easing works and how this policy may stimulate the economy.
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