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QE: More to do?

Stephanie Flanders | 15:25 UK time, Thursday, 6 August 2009

For once, the Monetary Policy Committee has pulled off a positive surprise.

When the Bank's policy-making committee said last month that they wanted to wait and see before deciding to continue with quantitative easing, the markets reeled at the policy's "imminent" demise.

Officials said we shouldn't jump to any conclusions about the future of QE. They really would "wait and see". But private and public remarks by some officials led people to suspect that they would put the policy on pause.

Earlier today, I did say it was quite possible that the Bank would decide to spend another £25bn, but spend it more slowly. In the event, they are spending more than I thought - another £50bn. But they are going to spend it more slowly.

I'm no conspiracy theorist. I don't think they planned to wrongfoot the market. But given what I said earlier about the policy's potential to affect confidence, it will have been no bad thing, from the MPC's perspective, that traders were expecting them to do less. The yield - or interest rate - on ten-year government bonds fell 15 basis points (0.15 of a point) in response to the news.

To date, the Bank has been spending about £25bn a month. Now they are going to spread £50bn in purchases over three months. It's possible to read too much into this - officials themselves like to emphasize that QE is not an exact science.

By taking three months, rather than two, they can put off another decision on QE until the November Inflation Report. But you can at least conclude that they don't think the economy's need for cash is quite as urgent as it was before.

What does this decision tell us about the Bank's view of the economy? Well, to state the obvious, it thinks that QE has more to do.

The Bank has been sceptical of the early estimates for GDP in the past - their growth forecasts show a range of possible final outcomes, for the past performance of the economy as well as the future. And indeed, the Bank - along with some other commentators - may well expect the disappointing second quarter estimate to be revised upwards.

But today's statement suggests they have taken that first estimate seriously enough to revise down their forecasts for past and future growth - at least for 2009. Despite today's encouraging news about rising car sales and, possibly, rising house prices, the Bank's policy makers probably believe there is still greater risk in doing too little than in doing too much.


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  • Comment number 1.

    Like the ambassador handing round his chocolates, with all this QE they are really spoiling us.....

  • Comment number 2.

    Yet more bailout for reckless borrowers and another kicking for savers and non homeowners.

  • Comment number 3.

    Stephanie wrote:

    "the Bank's policy makers probably believe there is still greater risk in doing too little than in doing too much"

    Are these the very same policy makers that gave us the credit boom and the credit crunch?

    The needed sacking six months ago and they still do today. They just haven't a clue! The bubble economy has burst. They are trying to re-inflate a busted balloon.

    They must insist on structural changes to regulation and in the way they regulate the market - but they are not doing so and are simply letting (the now fewer) monopoly banks suck the Nation dry - it will not do!

  • Comment number 4.

    Not completely convinced by your assertion that this is a "positive surprise".

    1) It is not entirely a surprise (after all you and others blogged about how it might happen)

    2) The UK monetary authorities agreeing to further print money, is in no way a positive story

    a) it means at best the BoE outlook is even grimmer than before;

    b) and at worst, since all of it (bar 2% or so) has been spent so far on Gilts, effectively funding massive govt borrowing, the accusation of the zimbabwefication of our money just got a little bit more plausible

    Please tell me what is positive about that.

  • Comment number 5.

    More currency debasement. The inflation genie is hard to put back in the bottle. Will they stop at nothing to win this election?! I almost hope they do at this rate...

    Is the word "debt" not in Brown's dictionary?

  • Comment number 6.

    Is it just me or is it not something to congratulate the BOE over? If we hadn't got into this mess in the first place I would have been more complimentary. Economists have to remember that the government are spending our hard earned money on car scrappage deals etc. QE has helped destroy our currency and the only thing to be happy about is that the whole world are in the same position.
    I see nothing the politicians and BOE have done to help get us out of this mess. Short term cash but long term pain. Who knoews how much the banks have in toxic debt yet? Please question the banks on off balance sheet holdings. The rumour I heard was HBOS had £18b off balance sheet toxic debt and that was way before the forced takeover. What's happening Stephanie?

  • Comment number 7.

    It seems to me that QE has crossed some kind of line today from getting the banks to lend again and staving off deflation, to pumping enough money into the system so that the cost of that credit is reduced to the borrower. QE is in danger of becoming some kind of Magic Pill that can be used over again whenever the BOE wants to boost the economy! After all we have been told for months that the cost of borrowing money is going to rise for consumers in the future, but now that the future is here and credit IS costing business and household borrowers more the BOE says... hold on, we don't like this, things are not moving quick enough, lets just create more money, simple!! The reason the cost of borrowing is set to rise is that banks need to re-build their balance sheets, so why not just create even more new money so the banks are fully re-capitalised now and we can go back to the good old days of unlimited cheap credit for all. Why not stop there? Why not create even more money to pay back all the billions we are borrowing as a country at the moment, then there will be no need to put up taxes and cut public spending because that might slow down any future recovery? Once you start creating money its very hard to stop. Who cares about what it might mean for the economy in say 5 years time, as long as it all looks rosy now thats all that matters!!

  • Comment number 8.

    This is just not good enough again. The problem with this sort of thing is that the only people who know how to benefit from the money and actually get their hands on it are the very people who have caused this problem and will only use it to continue to become wealthier while we become poorer. I think conspiracy theories are probably not far off the truth and true power brokers in this country are just looking after themselves. With both this and the absolute despair in the politicians at the moment, it is truly becoming a quite depressing place to live. Just who exactly is getting their hands on all this money? Where exactly are my taxes going? What on earth am I getting from the public sector for all the money I am made to hand over every month?

  • Comment number 9.

    After the governments acolytes' sneaky announcements over the past couple of weeks that things were improving , this kinda puts things back in perspective ; the economy is still in trouble, may in fact be sinking further into trouble and here we have the incompetents who got us in this position pretending they are still in control. I suspect that the government is now in a position where it will cut and run in the autumn and call an election in the forlorn hope that it can salvage a few seats for the comrades.

  • Comment number 10.

    Still no explanation, I see, of whether QE is genuinely a voluntary monetary stimulus policy, or if it would be more realistic to see it as a necessary, forced printing of money in order to enable the programmed gilt issues to be sold.

    Is this an irrelevant distinction, or is keeping the cat in the bag more important than helping people to understand the truth of what's going on?

  • Comment number 11.

    The basic concept of supply and demand with the addition of manipulation. With production down as demand is down, the need for money by business is down. The bankers, maintaining their posture of self-interest, are not loaning money and purposely keeping the economy down as a threat to the government about enacting banking regulations. This requires that those few borrowers be financed through the government/bank process. I still think it was a mistake not to have had public hangings of bankers. Economies world wide would be progressing if governments had held the bankers accountable and sent many to jail and some to the gallows. Maybe put them all in jail and let them work from there and they will be released based on improvements in the economy, sort of like their current bonus system, only these would need to be earned.

  • Comment number 12.

    Positive surprise? This is a ridiculous way to behave. All it has done is panic the markets. Sterling moves 1.5% lower as we speak! The official line is that they would probably rather do a little bit more than a little too less. This is rear view mirror thinking. If anything what data we have had recently (to the extent that any data can be be relied on with any degree of certaint) has been neutral to positive. The unofficial line is that Greedy Gordon can now get his hands on even more cash so that he can spend it on more meaningless jobs, higher wages, unproductive projects, social security and so on so forth. IT IS INCREDIBLE HOW ONE MAN (GORDON BROWN) HAS SINGLE HANDEDLY COMPLETELY WRECKED THE UK ECONOMY. I am completely depressed. Anyone who votes this man next year should be charged with treason!!! UK R.I.P

  • Comment number 13.

    I'm a bit confused by the reasons put forward by some for another load of money to be printed and thrown at the economy.

    It seems that inflation is still too low so this money is needed to boost the inflation rate to reach the BOE's target of 2%.

    Seeing as they already admit they don't even know what the last £125 billion has done yet it seems a dangerous game to play pumping even more in.

    They may get a lot worse than they bargain for. When will the computer say NO?

  • Comment number 14.

    You only have to look at what happened to the pound/euro rate at noon today to see what QE really means - devaluation. But I am sure that QE sounds better - particularly with an election just over the horizon! Who else remembers Harold Wilson's famous 'This does not mean that the pound in your pocket has been devalued'?

    QE is nothing less than printing paper money (or electronic cash) without the assets to back it up. (ie the gold Gordon sold).

  • Comment number 15.

    This will devalue the money in people's pockets and make everything we purchase more expensive. Already the Pound is down against every other major currency except the South African Rand!

    £50 billion is almost £1000 for every person in the country - if they had actually given it directly to us, then there may not be much complaining, but they didn't - they just gave it straight to the banks.

    I agree with Post #5. This is not prudent economics - it is just a desperate attempt to win an election.

  • Comment number 16.

    As I posted before, QE is simply a means to mantain a status quo. At the end of all this the fiancial elite will maintain it's dominance at the expense of the those encapsulated in the economy.

    There's nothing new under this sun :

  • Comment number 17.

    I just would like to know where I can see the Governments budget (in detail) for the past year or so. Is this possible? TC

  • Comment number 18.

    Funny that, and here I was thinking that the worst is over and the recovery is on its way, at least that's the myth the media has been spinning us.

    The fact is that we are now on the verge of a total economic collapse due to years of abuse within the entire financial sector, encouraged by governments of all persuasions and a gullible public, creating phantom wealth, bogus prosperity and an unsustainable standard of living.

    The only reason for the so-called good news of late is QE - both here and in America - has facilitated a temporal stasis, but rather like a brain-dead patient on life support displaying signs of life, as soon as the stimulus is turned off the economy will disintegrate.

    Enjoy it whilst it lasts.

  • Comment number 19.

    We have been printing jobs for years (champion of street football, diversity consultant, HIBS, the tax credits system management, quangos, ever more complex legislation that needs people to look after).

    Perhaps QE is just the monetary realisation of the same phenomenon? We dont have enough useful stuff to do since we became so mechanised so we may as well create something out of nothing and see what happens.

    Isn't that how the universe started?

    Nobody seems to question that.

    lets just keep on printing and see if the rest of the world ever notices that we dont have much that is of any use to sell anymore.

    If they get twitchy just tell em its part of a big metaphysical experiment.. a kind of social large hedron collider and it is in all the worlds interest that it is allowed to continue without question.

    Does anyone understand the value of anything anymore anyway?

    Nobody will notice for a few years in the current confused climate by which time we will all be rich again and will have bought our way out of this using money we printed.

    Neat huh!

    Sound like a plan?

  • Comment number 20.

    In all the post Stephanie I like this bit most of all

    `..officials themselves like to emphasize that QE is not an exact science.'

    Exact science? More like a reckless gamble. The final throw of the dice in the very faint hope of recovering what has been lost.

    We have had the City, Gordon's paid stooges, and most of the media who should know better running around for the last few days shamelessly shouting that the worst is over and all this will be forgotten in a year or two. But now we hear that we still need some more lead in the economic pencil.

    In one way I am saddened that we have even more QE as I don't like it as a policy at all but wonder if there is any alternative. On the other this puts the braggarts in their place.

    The so-called recovery is nothing more than a response to all the money this government has pumped into the economy from out of the taxpayers' future to make up for the calamity it inflicted on the country. What the bank is telling us is that the bounce is just that and there is a clear risk that it will soon be over.

    Double-U here we come!

  • Comment number 21.


    Why would rising house prices be considered postive news? It just means more money is required to get a roof over your head.

    So I detect your personal opinion coming into this? Maybe you want your house price to rise, but I want to be able to buy a good standard home at a fair price.

    Why is it that the BBC constantly shoves rising house prices being a great thing down our throats while paying lip service to the social consequences of poor and unaffordable housing?

  • Comment number 22.

    For all those sad folk, struggling to get by in these difficult times, READ this short, serious and not for the faint-hearted recipe:

    "How to make money?"

  • Comment number 23.

    all this is about is to engineer a plato for GB to call an election.

    Then when the mountain of debt is tackled we will plunge over a cliff.

    I hear the IMF are getting their visa ready.

  • Comment number 24.

    It would be useful if with these figures for QE there was some suggestion of what contribution that new money makes.. how much money is in the economy atm? - is this a drop in the ocean, a percentage point contribution or more??

    Stating that the BoE has printed X doesn't suggest anything.. maybe it's deliberately obscure but if so that is a bad mistake, it doesn't do anything to help confidence.

  • Comment number 25.

    It's alright the government using all our hard earned money to help the economy but who is going to look after the pensioners who are relying on their savings whilst interest rates on savings have plummeted.

  • Comment number 26.

    When the Bank's policy-making committee said last month that they wanted to wait and see before deciding to continue with quantitative easing, the markets reeled at the policy's "imminent" demise.


    They lied - they must have already planned this contoured QE exercise - and it does not inspire much confidence if the bank's policy making committee's main suggestion is 'wait and see' - we're all sitting around hoping and praying that these are the guys who can make a difference?

    Presumably, at some stage the QE money will run out - but what exactly is the money being spent on now - it sounds to me like its simply electronic money being shifted within different electronic accounting systems within a select few investment banks (with the usual banking favourites taking massive fees on the transactions)?

  • Comment number 27.

    The most exciting thing this year is Nissan's decision to make electric cars next year.

    Unfortunately it's not considered exciting.

  • Comment number 28.


    The French sell newly created euros and buy dollars already in existence. This new demand for a limited supply of dollars increases the value of the dollar against the euro."

    Very interesting quote.

    Thinking about it, you have to say "not necessarily." The French will import the spark plugs and the US banks will just end up with more assets in French vostro accounts, but only to the extent that US banks or other FX dealers are willing to hold Euro denominated assets.

    Having said that, if Euro assets are growing in value, then it should be easier for people wanting to buy USD to sell EUR as the FX traders will be more willing to hold EUR assets, as the EUR assets can be used to speculate on the EUR market.

    So no, it's the other way round -the EUR will probably rise against USD

  • Comment number 29.

    I am amazed that you have managed to put a positive 'spin' on this! So, the fact that they are planning to spend the money more slowly makes it a good thing does it? Erm must have really been scraping the barrel to dream up that one. Meanwhile it is worth remembering that on the same day as the extension to QE is announced, the European Central Bank has reiterated the need for retaining 'price stability' and for proceeding with 'prudence and caution'. Our lot have decided on the opposite course of action. They are obviously intending to inflate my pension away completely. Luckily my vegetables are coming up well.

  • Comment number 30.

    I wish someone would put the QE topic to bed. It's dull. It's boring. It's simple: they just want to recapitalise the banks, and they know the banks will hoard the money. It's deflation and there's no demand for debt, so the banks are just using it to clear their sheets. So can we now forget QE and move on? This QE is just a bank-saving stop-gap. Let's put it to bed and deal with the future.

  • Comment number 31.

    #23 IR35_SURVIVOR wrote:

    'all this is about is to engineer a plato for GB to call an election.'


    I beg your pardon!

    Being an engineer, I'm glad you managed to spell that word correctly...but 'plato'. So GB is planning to engineer a Greek philosopher to call an election!

    There's a bright guy on Peston's blog who doesn't know the difference between 'there' and 'their'...after I mentioned the difference he then went on to use the word 'their' instead of 'they're'.

    I just want to hit my head against a brick wall!
    Has our education system deteriorated that much?

    I fully agree with your sentiment in your though.

    Keep posting!

  • Comment number 32.

    Greetings from the DPRK. As you may know information is censored in the homeland - although we are yet to reach your western levels of indoctrination.

    Post #27 bemoans the fact that Nissan and their electric car production is not considered interesting. Consider this; The technology has been around for a while now, but is routinely suppressed by your freedom loving governments and oligarchs. Why else would GM develop an electric battery and sell the patent to Texaco? Who are Zenn Motors? Do they produce electric cars? and are they routinely impeded from doing so by the Canadian government. This also is not considered interesting.

    Post #31 offers English classes to our beleguered citizens, and ends with the enigmatic statement "I fully agree with your sentiment in your though." Phrase like this is very interesting, but regretfully does not appear in DPRK English phrasebook.

    Your money printing is very good idea, the Dear Leader is very happy and offers services of DPRK printing presses if you need help to print more, or just want to print faster. Korean printers are devoted to their work, and can supply testamonial from a Mr. Mugabwe if interested.

  • Comment number 33.

    Did I miss it? Where can I find the answer to the questions we asked the last time we discussed QE:

    Where did the money go?

    What effect did it have?

    I don't think that I can find the answer and it looks like the BoE doesn't have the answer either. Therefore, why the hell are we pumping in (or is it out) more money?

    The BoE can't say if banks are retaining this money to support their blance sheets (a hands-off it's mine approach) or if it's disappearing overseas to support the parent companies of UK subsidiaries.

    From what I read on here and other places, it doesn't look like it's having any noticeable effect within the UK economy. Seems like more and more doing less and less.

  • Comment number 34.


    I love Radio DPRK. Bring it on.

  • Comment number 35.

    Quantitative Easing is printing money and placing it into the economy. Like anything that has a value, the more of it you create - the less value it begins to have. The theory of Keynesian economics being carried out here does precious little, in real terms, to help those it was intended for. Instead we see with devaluing of a already fraction fiat based currency the forced response of inflation. This, in turn, drives prices up to those that are frozen or losing money. The banks increase a balance sheet at the cost of the people.

    Would we dare to look to Austrian economics school under such people as Ludwig von Mises or the like? Would we dare to challenge the status-quo for the benefit of the economy and the people? This helps to perpetuate the booms and bubbles that got us into this mess. Just the other day a "saved" bank with defaulting loans was proposed to be divide into assets and debts with the debts, in the near future, to be sold off. Will history repeat itself and AAA rating be supplied for toxic debt? We "saved" a bank that, by rights of prudent economics, should have failed.

    How much more debt can the every decreasing working class, without the ability to higher tax accountants thus avoiding such tax, survive before we implode? With fewer people working the burden increases steadily and the interest on such loans straps itself to our child and our children's child.

    LPUK Member

  • Comment number 36.

    Great. More inflation. These clowns need to read some von Mises.

  • Comment number 37.

    How can the banks hoarding all this money be inflationary? The MPC has so far pumped £125 billion into the economy via QE and there's been a massive REDUCTION in bank lending. As #30 said, this exercise is helping nobody in the real economy but is rather repairing bank balance sheets and facilitating fat bonuses. Surprise, surprise. Caledonian Comment

  • Comment number 38.

    So the Bank's answer to all our problems is to spend even more money that we haven't actually got.


    Let's hope the money markets don't find out, because that might cause the value of sterling to drop. Best not draw attention to it.....

  • Comment number 39.

    Stephanie - in your last QE posting you suggested that it might be the stock of QE that mattered and not the rate at which it increases. If this were the Bank's view, would they be making a point of the slower rate of spend this time round?

    I suspect that the Bank believes QE has a behavioural/psychological effect as well as its direct effect on the money supply and on the incentives of banks. It's fascinating to analyse the effect on expectations and the "wrong-footing" idea, but we can guess, second-guess and fifth-guess them; I think it will be hard to know the Bank's thinking for sure until the minutes are published. Or even then...

  • Comment number 40.

    And those who say QE is the same as creating inflation and devaluing the currency, you are in good company. Virtually all economists, and everyone at the Bank of England, would completely agree with you. This is not a controversial point and they would not regard it as a criticism!

    QE does not enrich banks - quite the reverse. If the banks hang onto the money, they will make losses on it. They can only make a profit from QE if they lend the money out to businesses - which is exactly what we want to encourage.

    I do agree that the Bank should consider buying corporate bonds with its money instead of gilts; but even if it doesn't, the policy will still help.

  • Comment number 41.

    #28 MrTweedy

    You still out there?

    It also reminds me of information theory... One guy I know who is very much into laissez faire capitalism and Austrian thinking was talking about the importance of free price systems, his rationale being that all kinds of signals are embodied in the 'price,' that hardly any 'managed' system could hope to deal with. I remember vaguely thinking that it sounded rational but I would have to think about it some more. Well, I did, and the fact is that information in signals depend on who his listening. (You can find out more here: ) Signals can combine to form noise, or cancel each other out. Whether or not something like price, or changes in price, can communicate anything at all really depends on a variety of things, and I imagine that free prices often obscure signals

    With the multiplier of asset speculation, growth in the EUR market is likely to make FX traders demand EURO. This growth will be accompanied by demand for USD (spark plugs). The question is how do these two signals combine? How do FX traders (eg: banks) react to growth in the Euro market and increase in demand for US products as a result of that growth?

    In all probability in this scenario the dominant influence would be the hot money coming in to the Euro market, multiplying through the banks, fuelling further growth, and further demand for Euro assets.

  • Comment number 42.

    When are we going to stop kidding ourselves that QE is a proactive policy to reflate the economy, rather than this being a side effect of the BOE extending its own overdraft because it was about to run out of money with which to buy gilts? The real story is an unreformed public sector leaking more money than the government has in tax revenue or can reliably and cheaply raise in the private markets. If those at the top are too stressed out to take the difficult decisions necessary to sort out the mess they've overseen then its time for them to step down.

  • Comment number 43.

    #31 some times my english gets the better of me, whilst working hard
    and blogging at the same time. But my maths has never let me down
    thats more than can be said for GB+co and some analysts. where the number clearly do not add up.

  • Comment number 44.

    #37 It will get out eventually. Just watch the price of bread, milk, beer etc over the next few years. Watch gold and silver too. They could curb it with higher interest rates and selling the garbage they buy but who would be silly enough to buy corporate and government debt at the moment?

    Who thinks these guys get that savings are the lifeblood of an economy?

  • Comment number 45.

  • Comment number 46.


    There's a difference between real and nominal prices. It doesn't matter if we have deflation or inflation - one of them is going up!

  • Comment number 47.


    Thanks for the link. Not read it in full yet but love the comment:

    "in 1971 Nixon broke the gold standard and permitted the USDollar to float on a cloud of arrogance and on a wave of liquidity that is best described as debt mixed with counterfeit."

    Seems to be along the same lines as Michael Hudson's book Super Imperialism:

    "Super Imperialism: The Economic Strategy of American Empire, was the first book to describe the global free ride for America after it went off the gold standard in 1971, putting the world onto a paper U.S. Treasury-bill standard."

    Senator Ron Paul also isn't afraid to levy this charge too!

  • Comment number 48.


    I've posted a reply to your nostro vostro comments back on the original thread ("A Large Sucking Sound").

    The economy is full of competing forces acting in opposite directions. The strongest force will move a country's currency in a particular direction.

    This is why it is difficult to predict the outome of any particular stimulus. Lloyds makes a loss, share prices go up. Then RBS makes a profit, and share prices go down....

    Expectations and speculation have a big influence. Such things are not fully rational, but they will even out over time.....

    I would like some safety limits put in place through legislation.
    We don't let people drive on the roads without first passing a driving test, but we have no such safety limits protecting the world of finance and insurance.

  • Comment number 49. this serious?

    How can printing money to fund government borrowing in the middle of a debt crisis, when our government has huge amounts of government debt outstanding - and still wants to splurge huge amounts on public expenditure - be a positive thing?

    I wonder at what stage of the decline of the UK the BBC will begin to report accurately rather than being a propaganda mouthpiece for a failed government...

  • Comment number 50.

    I would recommend:

    The Coming Collapse of the Dollar and How To Profit From It

    by James Turk and John Rubino

    if you want a truly eye-opening account of the future, rather than the patent nonsense peddled by "economists" like the author here (who is even so celebrity focused to create her own term Stephanomics).

    Face facts - our economy is grossly overvalued in terms to what it actually represents, and when people understand this, the mother of all crashes is coming.

  • Comment number 51.

    So the BoE are going to 'print' another £50bn over 3 months to buy Gilts...which is roughly what the Government are having to borrow every 3 months.
    Wonder what will happen on the Gilts market when the current QE funds run out ?

    Not difficult to see what's going on here, is it ?

  • Comment number 52.

    7 million man years to clear off QE debt.

    At a salary of lets say, 25k pa. and assuming that nothing is spent on anything as the salary all goes to payback

    4 years = 100k
    40 years = 1 million
    40,000 years = 1 billion
    A total of 175 billion of QE out there, so

    40,000 years x 175 = 7 million man years

    Now who do I thank for this wonderful scheme to waste such a bundle of human activity ?

  • Comment number 53.

    Doesn't exactly take brains to PRINT money do it? MAKE it? Someone should tell them how money_is_made.


  • Comment number 54.

    Comments 42 (edwdprice), 49 (DialSquareDomination) and 51 (Queasy_Money)

    Phew! There was me thinking that Liam Halligan and I were the only two people left in the world who actually recognise QE for what it is. And then, as if by magic, along come three more who have not been hoodwinked by the propaganda.

    I've no objection to the BBC Economics Editor writing about the possible benefits QE may have on the economy at large, but I don't think it's exactly quality reporting to fail in doing so even to mention the fundamental reason for it's introduction, and to write as though the maybe beneficial side-effects are really all that matter. We're not five-year-olds - we know that the purpose of eating carrots is not to enhance nighttime vision. Tell us it straight, for heaven's sake. Then public discussion might have some purpose.

  • Comment number 55.

    The best alternative to QE is universal tax credits and income tax reduction. Then we could all pump money back into the economy, or into the banks in reducing our debts. Let's call it a "Poll Tax Credit" - give something to everyone!
    No, that won't happen. Sharing the gain is for the banking brothers; pain is what we ordinary mortals get to share.

  • Comment number 56.

    #48 responded there too

  • Comment number 57.

    "52. At 10:21am on 07 Aug 2009, strategycall wrote:
    7 million man years to clear off QE debt.

    At a salary of lets say, 25k pa. and assuming that nothing is spent on anything as the salary all goes to payback

    4 years = 100k
    40 years = 1 million
    40,000 years = 1 billion
    A total of 175 billion of QE out there, so

    40,000 years x 175 = 7 million man years

    Now who do I thank for this wonderful scheme to waste such a bundle of human activity ?"

    But remember the cost of keeping G.Brown in office is priceless.........

  • Comment number 58.

    Robert Peston seams to be moving more to an "It's getting rosey" position. To the average listener the main gist of his reporting yesterday seemed to be 'Still some grey clouds.. but essentially we (i.e. the banks) are getting there'. He was also rolled out on early Breakfast TV. Maybe GMTV soon?

    I have to say it really did seem quite a turnaround. Perhaps now HMG is closed for their (hope I spelt that right) summer holidays we'll see more of him giving us a boost.

  • Comment number 59.

    I would like to echo what Post 21 has said ...

    "Why would rising house prices be considered postive news? It just means more money is required to get a roof over your head ... Why is it that the BBC constantly shoves rising house prices being a great thing down our throats while paying lip service to the social consequences of poor and unaffordable housing?" ...

    And is also very pertinent to this subject too.

  • Comment number 60.

    QE will NOT work for one very substantial reason -IT HAS NO CLEAR OBJECTIVE.

    It is not SMART and therefore can only be speculated upon and not measured.

    It is a monetry instrument directed not at 'true value' but only at money! Anybody seen any of this 'new money' in their businesses or on the High Street. Is QE only working because things could be worse?

  • Comment number 61.

    #31 BankSlickerminustheR - "There's a bright guy on Peston's blog who doesn't know the difference between 'there' and 'their'...after I mentioned the difference he then went on to use the word 'their' instead of 'they're'."

    Oh, the joys of over-reliance on spell-checkers !! :-)

    Of course, this has nothing to do with the government dumbing down our kiddies' education or the current PC/fascist thinking that kiddies should be allowed to spell phonetically instead of grammatically !!

    Thank God, my kiddies are out of this; it's my grandkiddies I have to worry about now !!

  • Comment number 62.

    #33 FDD - "Where did the money go?"

    Well the money is "created" and then used to purchase more government debt - Gilts !! This is then treated as real assets and sold on to suc..., err, I mean, wise investors !! Meanwhile, the printed money is used to pay for the vastly inflated government spendings in order to buy -

    (1) the complacency of the Civil Service
    (2) electoral votes in by-elections
    (3) (false) belief of the "lumpen proletariat" in the "green shoots of recovery"

    To paraphrase the words of a song from the Flower Power era - "Where have all the QE gone ?" The chorus/refrain is so, so apt - "When will they ever learn ??"

  • Comment number 63.

    #38 "Let's hope the money markets don't find out, because that might cause the value of sterling to drop. Best not draw attention to it....."

    Go to and look up the history of GBP/CNY exchange rate over the last 2 years !! It makes for very interesting reading. While you are there, look up the historic FX rates for USD/CNY and EUR/CNY for the same period !!

    This is an FX rates site that is trusted by various FX traders !!

  • Comment number 64.

    #62 ishakandar,

    so what happened to the promise to use the 'money' to buy "quality" commercial paper?

  • Comment number 65.

    The BBC website administrators, in their infinite wisdom, has decided that I shall, henceforth, be known as "you" !!

    I wonder what message from which God had made them decide so ??

  • Comment number 66.

    #64 FDD - "so what happened to the promise to use the 'money' to buy "quality" commercial paper?"

    You mean you actually believe their promise ??? WOW !! Can you lend me 100 million quid ?? I promise to pay you back whenever I can !! :-)

  • Comment number 67.

    In #5 thecoopster asked "Is the word "debt" not in Brown's dictionary?"

    Probably, but he may see the word in the context of the Church of Scotland verions of The Lord's Prayer: "Forgive us our debts, as we forgive those who debt against us".

    Would that it were that easy, but in our present predicament that really is pushing forgiveness beyond its elastic limit...

  • Comment number 68.

    #67 "Forgive us our debts, as we forgive those who debt against us".

    If I remember what was hammered into my thick skull during my school days, it's - "Forgive us of our *trespasses* as we forgive those who *trespass* against us" - and is immediately followed by - "And lead us not into *temptation* but deliver us from *evil*" !!

    Will the Good Lord lead us away from the *temptation* of conspicuous credit-funded consumerism and deliver us from the *evil* of "QE" now ??

  • Comment number 69.

    The chart at the bottom makes interesting reading !! Please note that the two banks still making consistent profits are the same two who have *NOT* taken the Queen's shilling !! Wherefore are the nay-sayers who insist that the size of the banks is the root of this credit crunch evil ??

    - Ishkandar (not "you", as this site seem to think I am)

  • Comment number 70.

    #69 ishky

    Now we have a REAL problem because I am also YOU. But I know that I am NOT you. Therefore if I am ME and also YOU at the same time then who the heck are YOU? It's all very confusing!!

    Interesting that in The Lords Prayer the request for forgiveness is limited and conditional. It asks that our 'trespasses' are forgiven in the same way and to the same degree that we forgive others who have "trespassed against us". I have no idea why the Scottish churches chose 'debt' as the translation. I think the more modern interpritation of 'sins' is clearer.

  • Comment number 71.

    Hello, hello, hello...Pyongyang calling.

    Greetings British men. You are barking up the wrong tree. Your QE is not relevant except that it shows your wagons are firmly hitched to the USA, or the former USA as the Dear Leader prefers.

    Soon now our brothers in China will demonstrate their ability to escape from the trap you have so diligently set for them. The sun rises in the East, and as our Chinese brothers say "sometimes little man eat more than big man, but eventually big man eat little man" The big man is hungry, although not for US$

  • Comment number 72.

    I agree with many of the comments - including post 71 above ... IMHO simplifying things to 'printing money' and trying to 'spin a recovery' simplifies the story a lot more too ... take a look at for instance ... and as post 71 quickly points out ... it won't work (for very long, if at all) either ... and there's a lot worse still to come too ... it's just a shame we're currently opting for 'spin', instead of adopting 'solutions' that will work!

  • Comment number 73.

    Ishkandar and FDDave, posts 69 and 70

    It is quite straightforward really, you are both this week's cyber Walruses.

    The Beatles explained it all about 40 years ago in 'I am the Walrus'

    'I am he, and you are me, and you and me and we, are all together'

    Coo Coo Cachoo

  • Comment number 74.

    #71 RadioDPRK - "Soon now our brothers in China will demonstrate their ability to escape from the trap you have so diligently set for them. The sun rises in the East, and as our Chinese brothers say "sometimes little man eat more than big man, but eventually big man eat little man" The big man is hungry, although not for US$"

    If your "Dear Leader" ever allows you to read about the history of Korea, you will find that for the last 3,000 years, China and Japan have been going, "Whose turn is it to invade Korea this century ??" :-)

    Of course there was an interregnum when neither China nor Japan ruled Korea. I think it was about 100 years from around the end of the 13th century to the end of the 14th century when Korea was ruled by the Mongols !!

    Therefore, considering that the DPRK is not exactly flush with cash or food, you might want to be a little more circumspect about the Chinese !! Just a bit of friendly advice !!

  • Comment number 75.

    #70 "Now we have a REAL problem because I am also YOU. But I know that I am NOT you. Therefore if I am ME and also YOU at the same time then who the heck are YOU? It's all very confusing!!"

    I know I am *ME* but the Beeb says that I am "you" !! So who the hell are *WE* ??

    Still, to paraphrase Descartes - I stink therefore I am !! :-)

  • Comment number 76.

    #73 "It is quite straightforward really, you are both this week's cyber Walruses."

    Eeeee !! I hate fish !! Can't I be some other animal, like a nice cuddly tiger, instead !! :-)

    Meanwhile, I hope the Beeb can sort this rather confusing metaphysical, existential problem soon !!

  • Comment number 77.


    "Still, to paraphrase Descartes - I stink therefore I am !! :-)"

    That was the philosophy of Harry Enfield's Wayne Slob :)

  • Comment number 78.


    Just testing to see if Aunty had solved that problem as well !

  • Comment number 79.

    #78 FDD - "£££££££££££

    Just testing to see if Aunty had solved that problem as well !"

    Wouldn't do me much good since I have a foreign keyboard !! However, I can write Chinese/Kanji with this thing !! :-)

  • Comment number 80.

    To all those heralding the arrival of the £ sign to this will shortly become irrelevant!

  • Comment number 81.

    Try this one ¥

  • Comment number 82.

    Forget about "green shoots of recovery", this is a whole rain forest of it !! 20% annualised growth will have most developed nations salivating like Pavlov's dogs !!

    Perhaps the fact that they have less of a credit-fueled consumer culture out there helps !! They certainly didn't go around "queasing" (quantitative easing) their economy !!

  • Comment number 83.

    Hi Stephanie
    Can you tell us who the sellers of the gilts to the BoE are under the Asset Purchase Facility and what they are doing with their liquidity.Simple question really, asked several times of you.Other commentators in other media seem to have more facts on this than your posts are prepared to disclose.Why dont you give us the full picture?

    The committee stated why they were increasing the purchases : the recession and lack of credit have limited the supply capacity curtailing growth potential. Surprised that you give no analysis on their reasons. WE can all see that the banks' lack of capital is derailing QE.

  • Comment number 84.

    This is Pyongyang calling. The Dear Leader does not desire that Radio DPRK enter into petty debates. This holds true even when imperialist lackies such as poster #74 egregiously falsifies and seeks to diminish the glorious history of the DPRK.

    No, the sole purpose of RadioDPRK is to warn the opressed masses in the West that the end of the US$ hegemony is imminent.

    Prepare yourselves and defend yourselves as best you can from the coming carnage, time is of the essence. Banish from both your minds and your hearts the false siren voices that would lead you ever deeper into the wilderness.

  • Comment number 85.

    Timing is critical. Further quantum easing of a substantive nature in the UK before the US takes the lead could send the pound into free fall against other currencies. The US should go first and then it will be safe for others to follow. If the US economy does not turn around, no amout of QE will save the UK or anyone else. The US is the 800 pound gorilla in the room.

    The mechanisms by which the US government and others have tried to reinvigorate their economies by reducing interest rates, granting loans to failed banks and other financial institutions, and by direct spending has proven very inefficient at getting money into circulation. Whether relying on banks as often unwilling intermediaries to make further loans to borrowers or having to wait for government contracts to pay out for services and products rendered to it in targeted markets and then have the money disperse throughout the economy, the response has been sluggish and late. About all you can say for it is that it was better than doing nothing but not much else. We are still stuck with banks that have unknown quantities of dirt still under their rugs and looming disasters in at least four other known areas; consumer credit, commercial real estate, a bond market bubble, and European bank vulnerabilities in Eastern Europe.

    IMO what the US government should have done was rather than trying to prop up hopelessly failed banks which allowed them the luxury of paying whopping bonuses at taxpayer expense and not knowing if the taxpayers would ever be paid back was to compete against them as the bank of last resort. So if a business loan was say 6.25% from a bank but a qualified borrower couldn't get a loan, he'd get one directly from the government at say 6.75 or 7.00 percent. This would have put the banks on notice that if they didn't lend, someone else with limitless pockets would and the non financial sector would not be held hostage to criminal negligence and incompetence of the banks. If they went broke so what. Their assets would have been sold off for what the market thought they were worth and new banks would eventually be chartered free of toxic assets. They could take over the government loans and the government would slowly get out of the banking business as the financial industry re-invented itself. The shareholders who did not hold their boards of directors to account for their mistakes would lose their investement, the execs would be unemployed on the street where they belong, and the taxpayers would be whole. But no, we are in the same bind we were in last fall with what may only be a temporary reprieve depending on how many other toxic assets we don't know about they hold. Suddenly the banks don't like capitalism anymore. In capitalism, failure means bankruptcy and nobody is too big to fail. The mechanisms governments have chosen to mitigate what they precipitated themselves has merely compounded one disaster by adding another.

  • Comment number 86.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 87.


    I'd be grateful if you could let us know where you obtained the latest M4 figures from. I can't see anything more recent than Q1 '09 / May '09 on the ONS website. Would also be useful to know which particular set of figures you are looking at. I've taken a keen interest in 3.1H Sectoral analysis of M4 and its sterling lending counterpart (11.8) pg 65 of the latest FinStats July09 report.

    Lending (by banks & building societies) to other financial institutions (AVHW) has risen from £54bn in 2004 to £289bn in 2008. That's a multiple of nearly five times! Meanwhile lending to non financial corporations (AVHX) is a paltry £17bn. Another curiosity is that in 2008 there is a negative (?) lending of £42bn to the household sector (secured on dwellings AVHY).

    Is it just me or is the real "credit junky" not the humble UK householder (AVHZ £3.6bn) but our beleaguered financial institutions?

  • Comment number 88.

    The reasons for QE should be fairly simple really? Government and BoE try to look effective in the short term (but all in effect at the short, medium and long term risk of the taxpayer)- a matter of convenience for bureaucrats.

    QE is a further 'back door' bail out for the banks which allows major financial institutions to shift huge amounts of money around in the economy without anyone really getting their hands dirty in the process in terms of making the money 'working capital for UK businesses generating income, employment, demand.

    Besides the obvious potential for boosting the economy I think that there is a hidden agenda with QE regarding boosting UK GDP figures before the next general election (so as to reduce statistical recessionary effects) and so the BoE is happy to be seen to be justifying its position and having a major role and the government sees it as showing it is doing something - even though no one will say where the money is going.

    My guess is that the main beneficiaries are merchant brokers, bankers, and analysts (many or most being non.doms) who will be generating large bonus demands on QE for shifting/shuffling large sums of money between merchant investment bankers.

    QE could be very good if the money is spent effectively on stimulating demand in the wider economy but where is the evidence that this is being done?

    The inescapable logical conclusion is that the way QE has and still is being operated is mainly for statistical GDP 'fiddle'/political purposes. If QE does not work - we'll see hoards of highly paid wise-men (and women) telling us that the global recession is still worse than anyone has imagined.

    The money would have been better spent setting up new ethical UK focussed banks so that consumers can vote on their feet and close their accounts with 'bad banks' and put our money where it matters most. Bad banks can then be 'smashed up'. Shareholders of banks should bear more risk.

  • Comment number 89.

    Hawkeye_Pierce and nautonier are the latest voices to ask the real questions regarding QE. Basically, what is QE really intended to do (not the PR fog that is being transmitted) and where is the money going?

    Before QE was even mooted, many of us on both this blog and Peston's were calling for a Keynesian type stimulous package. Brown even declared governments intention to call forward infrastructure programmes. What has happened to those programmes? I don't hear of major works being started. Whilst the credit crunch was still supposed to be a US problem, the Uk acknowledged that it needed to invest in new nuclear stations. Now I know that Hinkley was chosen as a sight. I also know that the major groundworks for Hinkley C were completed when Hinkley B was being built built. But I still don't see any major building activity!

    Since 1980, the UK has had a steadly increasing imbalance within its economy. We all knew it but were passified by talk of a "post-industrial society" and supposedly growing consumerism (how did we all buy goods and services prior to 1980?). When the crunch bit, why were these issues not addressed? Why are we spending future resources not on fixing the problem but merely recouperating the enfent terrible which caused the problem in the first place?

  • Comment number 90.

    3 - John_from_hendon

    "The needed sacking six months ago and they still do today. They just haven't a clue! The bubble economy has burst. They are trying to re-inflate a busted balloon." can't sack dictators only overthrow them. There is no accountability left in Governemnt, banking or politics.

  • Comment number 91.

    Post 90 - your point is well made and arguably adds more to this point too. IMHO modern communications will eventually change everything ... including 'power', 'politics' and 'economics'.

  • Comment number 92.

    Liam Halligan has said that one third of gilt sellers are foreign investors. Is that right?

  • Comment number 93.

    No.92 "Liam Halligan has said that one third of gilt sellers are foreign investors. Is that right?"

    I'm not sure but I wouldn't be surprised since the confidence in the £ is very low and still sinking !! Therefore, foreign investors are "going when the going's good" !! If the US carries on its money printing policies, the same will happen to it too !! That's why the Chinese and the Brazilians are very worried about their US Debt holdings !!

  • Comment number 94.

    The old man of Westminster
    Turned the Bank of England into a money printer
    It printed all day and all night
    Foreign investors took flight
    And petrol went up to £5 a litre

  • Comment number 95.

    #89 fdd

    Problem is all our nuclear engineers have retired or gone abroad. We will depend on our dear French neighbours to build nuclear (if we can ever afford it) but they cannot pronounce "Inckley" so are probably lost on the way there.

    The flower of our youth are either watching (or appearing on) day time television or whiling away the hours on their Playstations awaiting the next JSA cheque.

    I doubt I'll be around to see the look on their faces when the screen goes blank and the power is cut off, but you never know.

  • Comment number 96.


    There hasn't been a nuclear power plant desgned and built in the US for over 30 years. All of the people who had the knowledge to design them to the satisfaction of the NRC are retired, dead, or have forgotten much of what it takes and it wasn't passed on. No French or other engineers are qualified to design to US standards because they are different from IAEC standards, there is a language barrier, a stark difference in technical philosophy, and the Amerian standards are remarkably tough. I know, I worked on one that was cancelled partway 1977. It was among the last under design. GE, Westinghouse, and others can dig out the old drawings of the reactors and find them, tweak them, build them but the plant as a whole is a much larger project, one in which the Nuclear Steam Supply System (NSSS) is only one component. Nor could you take even already competent engineers (there are relatively few of them left in the US compared to the way it used to be, the result of negligence, indifference, and stupidity on the part of industry and government in building and maintaining critical infrastructure, the underlying foundation of real wealth) and train them in anything like a year or two. If the US government made 100 billion available today to build 20 or more nuclear power plants, I would be surprised if even two or three really got off the ground in the next three to five years. It should be recalled that even in its heyday, projects failed badly. Shorem on Long Island east of New York City was completed but never was allowed to start up because an acceptable emergency evacuation plan couldn't be devised. Why didn't they think of that before they designed and built it? One billion dollars wasted. It spelled the demise of LILCO, the Long Island Lighting Company, the local electric utility.

    Nuclear power engineering is not like IT where you can train someone in one to three years and they are writing code. This takes far more skill from a far more diverse and complex team. The value of these teams when they existed was vastly underestimated. Now that they are gone, the only available source of new large scale non CO2 generating energy is no longer available. Meanwhile, American nuclear power plants which generate 20% of America's energy, more on a KWH basis than France, are aging and will soon begin to reach the end of their usable lives. At that point, the only thing to do will be to decommission them. There are no substitute sources available except fossil plants. Even hydroelectric power which has been taken for granted may become unreliable as weather patterns change and lakes that are fed by rainfall and melting snowpacks every year the plants depend on dry up. There is no possible way for renewable energy and energy effiency to come close to filling the gap between what is needed and what will be available. The mantra that energy effiency and "green energy sources" will save the planet has to be one of the biggest hoaxes environmentalists have ever perpetrated. They never give you actual numbers, just their vague generalities. The future IMO looks rather grim. This has been made into a political football mostly by European environmentalists instead of a worldwide scientific and technologial emergency the way depletion of the ozone layer from CFCs and radioative fallout from nuclear weapons testing was and the way it should have been 20 years ago. As a result, it may be too late already. The impact this will have on economics? Devastating and irreversable.

  • Comment number 97.

    R.I.P. G.D.P.?

    Zencey is a rare case where such a dissenting voice is able to gain mainstream media attention. His article got me thinking about GDP, profits, bonuses etc. and how we got into this sorry mess. Then it dawned on me that western society has overdosed on rigid goal-directed behaviour:

    "Diagnostic control systems are the backbone of traditional management control, designed to ensure predictable goal achievement." (Robert Simons Levers of Control 1995).

    I propose that to understand where we have gone wrong with our economy (and indeed corporate mgt) we need to understand the underlying control mechanisms. I am reminded of the concept of a 'Diagnostic Control System'. This is defined as a formal information system for measuring and controlling particular organisational outcomes. They are designed to achieve specific and predictable goals without constant management attention, and are exemplified by the following characteristics:

    - Measuring the output of a process
    - Comparing performance against predetermined standards (e.g. benchmarks & targets)
    - Possessing the ability to correct deviations (i.e. a deliberate management intervention – usually in the form of financial rewards)

    Promoting wealth (either in a national sense: GDP, or a corporate sense: profits) in this manner explicitly demands the implementation and achievement of a defined outcome, by adopting the maxim "what gets measured, gets done". However, implementations such as this often involve the creation of targets, thus falling foul of Goodhart's law which states that:

    "When a measure becomes a target, it ceases to be a good measure."

    What often happens with such systems is that they promote a highly short term focus and often result in cheating ('gaming' the system). A failure to acknowledge the complexity of wealth and quality of life has created the temptation to treat it simplistically, such as a single management metric (GDP, share price etc.). Approaches such as this are shown to result in unintended and highly destructive consequences (Simons cites examples such as Enron & Chernobyl).

    Unless the measures of this outcome are objective (independently verifiable) and complete (in that they capture all relevant actions and behaviours) then unintended consequences can occur. In other words, the stated outcome or target may be achieved, but at the expense of other (potentially more serious) mandates.

    A diagnostic system's strength, therefore, can turn out to be its own undoing.

  • Comment number 98.


    I thought Westinghouse were heavily involved with the AP1000 reactor, and expect a lot more work in China where dozens of nuclear plants are operating or planned? The French are there too with the EPR.

    Having said that, there is no doubt that the Chinese will take the lead in the world in years to come. If we don't get our act together in this and other fields, we'll all have to start learning Chinese.

  • Comment number 99.

    Like the hybrid car, it is likely that nuclear energy will be a stop gap in power generation. I truly believe that the timing and economic conditions are right for the next major technological breakthrough. What it will be and when it will come 'on-stream' I cannot tell.

    Until then we must take urgent action to secure our base-load power supply as a strategic necessity. If coal has now become the climate change champion's bete-noir (surely there is more that we can do in 'scrubbing' technology?) then nuclear has to be the major option. At this point it doesn't really matter that we have to import technology that we were at the forefront of.

    Having said that, can anybody answer my original question - WHERE HAS THE QE GONE?

  • Comment number 100.

    No.99. foredeckdave

    My dear Foredeck.

    According to latest analysis by IMF:
    The BoE, through QE, is now in possession of 15% of the total gilts market.
    The BoE has pledged asset purchases worth 8.6% of Britain's GDP.

    The money itself has gone into commercial banks' safety capital, and also found its way into the investment banking arms of the same banks, who have used the funds to generate profits from speculating on shares, bonds, currencies, commodities, derivatives, etc.

    There is little profit in lending at present; so banks aren't concentraing on this side of their business. Despite this, house prices have inched up due to QE.

    QE is causing price inflation, as (i) we have some imported price inflation through the weak sterling, and (ii) we have asset price inflation in the stock market, commodities, housing market....


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