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The Emperor’s Clothes

January 22, 2015

I’m a great believer in the saying that there are no stupid questions.  So here’s a stupid question: what about Quantitative Easing?  No reason, just they were talking about it on the lunchtime news and saying that the Bank of England had “created” £375 billion of money out of nothing, used it to buy bonds, in the hope of getting the banks to lend money to businesses and get the economy moving.  And that it didn’t work.  It’s all about “injecting money into the economy” apparently.

£375 billion.  There are about 64 million people.

Why don’t they just give everybody £5859 (give or take 37p) and inject it where it would do some good?  (£375bn/64m, which my calculator thinks is 5859.37, assuming I put my decimal point in the right place)

You know.  If they can really make money out of nothing.  Which apparently they can.  [Economics make my brain hurt at this level.]  But I think it’s more likely to stimulate the economy if I can have enough money to pay my university fees AND go to Wiscon, than if the banks have, er, more gilts and other incomprehensibles.

Apparently one of the expectations of QE is that “Purchases of financial assets financed by central bank money should initially increase broad money holdings, push up asset prices and stimulate expenditure by lowering borrowing costs and increasing wealth”. (p201)

So.  Is it an “Emperor’s new clothes” question to ask why giving me five grand which I promise faithfully to spend spend spend wouldn’t do the same thing.  Only better.  And be MUCH more fun?

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