ChatterBank2 mins ago
How Much Is My Pound Worth After £200 Billion Of Quantitative Easing?
Quantitative Easing devalues the value of money. If my £1 was worth 100p yesterday, and today we've been "eased" what is my pound now worth?
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as said, money isn't actually printed; the Bank just credits the accounts of the lucky recipients - mainly banks, which use it for speculation, bonuses etc. If it were to credit the accounts of consumers, on condition that they go out and spend it as they did under the scrappage scheme, that would probably have more of an effect.
But regardless whether you print notes or fiddle PC figures there is still more cash created that has to be in someone's possession and spent. I feel we are getting caught up on irrelevancies here; the affect is the same. Someone has had the power to create cash, and we individuals are all the poorer for it. It's like an immediate taxation on everyone with savings, and a reduction of income to everyone on top.
And too make matters worse, I have little confidence the new status quo will not remain and no decision made to remove the new cash later. Not that I approve of a private concern having such power over the country anyway, rather than a group democratically elected by the people. Passing over responsibility because the chancellor at the time wasn't up to handling it, was not a good move; one wonders what chancellors are supposed to be for if not managing the economy. But that is probably off topic.
And too make matters worse, I have little confidence the new status quo will not remain and no decision made to remove the new cash later. Not that I approve of a private concern having such power over the country anyway, rather than a group democratically elected by the people. Passing over responsibility because the chancellor at the time wasn't up to handling it, was not a good move; one wonders what chancellors are supposed to be for if not managing the economy. But that is probably off topic.
You could look at its effect on currency in several ways;
1. The process of QE tends to cause short term inflation, so your £ is likely to be worth only 0.98/0.97 ish.
2. Or you could decide that the devaluation is best measured against the change in Sterlings value against, say the dollar, in which case it would seem that the announcement of QE2 caused the pound to drop against the dollar by a couple of cents.
3. Or , you could say that extra money has been created, so the devaluation is the amount of extra money created (£275 billion, QE1 +QE2) divided by the UKs GDP ( I think around £1.6 trillion) - who has the calculator?
Up to you which of those measures you wish to use ;)
Of course, as and when the economy finally decides to pick itself up out of the gutter, and hobble arthritically, every faster into the sunset, inflation should be curbed, and the govt bonds bought up by QE are gradually paid back, so everything should even out in the long run ( at least, thats the theory).
Jury is out on QE1 - i think it was felt that around 50% of the £200 billion got to where it was needed, the other 50% was subsumed in the extra inflation and banks bolstering their cash reserves...........
Thing is, QE is only going to work if businesses are crying out for money, which is being denied them by parsimonious banks - If on the other hand, business is just battening down the hatches and refusing to commit to spending whilst the economic forecast is so gloomy, it is difficult to see QE having any significant effect..... It really is all just guesswork and hope, at the end of the day...
1. The process of QE tends to cause short term inflation, so your £ is likely to be worth only 0.98/0.97 ish.
2. Or you could decide that the devaluation is best measured against the change in Sterlings value against, say the dollar, in which case it would seem that the announcement of QE2 caused the pound to drop against the dollar by a couple of cents.
3. Or , you could say that extra money has been created, so the devaluation is the amount of extra money created (£275 billion, QE1 +QE2) divided by the UKs GDP ( I think around £1.6 trillion) - who has the calculator?
Up to you which of those measures you wish to use ;)
Of course, as and when the economy finally decides to pick itself up out of the gutter, and hobble arthritically, every faster into the sunset, inflation should be curbed, and the govt bonds bought up by QE are gradually paid back, so everything should even out in the long run ( at least, thats the theory).
Jury is out on QE1 - i think it was felt that around 50% of the £200 billion got to where it was needed, the other 50% was subsumed in the extra inflation and banks bolstering their cash reserves...........
Thing is, QE is only going to work if businesses are crying out for money, which is being denied them by parsimonious banks - If on the other hand, business is just battening down the hatches and refusing to commit to spending whilst the economic forecast is so gloomy, it is difficult to see QE having any significant effect..... It really is all just guesswork and hope, at the end of the day...
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