More ‘funny’ money from the Bank of England

Don’t want to drone on about economics, so will keep it short.

Today the Bank of England announced a £25billion increase to its asset purchase policy – otherwise known as quantitative easing, or printing ‘funny’ money. Two points to note, one from the Bank’s press release and the other from Stephanie Flanders, the BBC’s economics editor,

  • In the Bank of England’s press release is this comment about future inflation prospects,
    •  “Inflation is likely to rise sharply to above the 2% target in the near term, reflecting higher petrol price inflation and the reversal of last year’s reduction in VAT.
  • Stephanie Flanders comments that “… it is far from ideal” for the Bank to spend £173billion out of £175billion of QE on government debt, known as gilts. She says that the Bank would like to buy corporate bonds, but can’t because there’s an insufficient supply available to buy. Most odd. Don’t the likes of Rolls Royce, BAE Systems, or other very large businesses have a need for capital? I just wonder how hard the Bank tried.

Due next week is the Bank of England’s quarterly inflation report. Depressing reading, I imagine.

One thought on “More ‘funny’ money from the Bank of England

  1. What people do not understand is that funny money is electronically created by banks as a loan, or debt to society. This is known as credit creation, and ofcourse it is repayable with interest….!!!

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