Quantitative easing - where will the funds be injected?

They could always give it to me, to get me to start spending again. For instance, for a mere 5 a day I would go back to spending 3 a day on a sandwich, which I have done for years until this year. Oh but wait a minute - that would hit Sainsbury's profits, because my wife wouldn't be buying ham, cheese, pickle and nice crusty bread for my lunch box. So the 5 has made about 1.80 of difference. More difficult than I thought this quantitative easing.

My understanding is that they are going to buy corporate bonds and other dodgy debt from banks, which will put money into the system.

Now first of all I thought they were already buying up the stuff nobody else wants, and secondly banks will use the money to build their capital, to restructure (all those redundancy payments have to come from somewhere) in other words to do anything rather than lend. They'll be lucky to get 1.80 worth of benefit out of every 10 they put in.

So that brings them back to they would still be better off giving it to me, wouldn't they?

Seriously it's not going to work, it's the last desperate throw of the dice by a gambler who is already "all-in."

Neb

In effect they will be buying up government debt on which costs the government interest with new debt (money) on which they will not pay interest.

So the money will buy toxic debt? Sounds like more bailing out of the banks.

Maybe. On the other hand it's encouraging that European, American and possibly others have a similar approach. I *hope* they know what they are doing....

James

By "buying up" do you mean "paying off" - i.e. "reducing"?

James

The Bank of England buys up government debt on which it is paying interest, by issuing new money (i.e. debt with no interest). So the Bank now receives the interest. But the Bank is an arm of the government, so, what really happens is that the amount of debt which the government has to service through taxation is reduced, the public receiving money (IOUs) in return. The amount of money (largely bank deposits) in circulation goes up thus increasing the likelihood of future inflation.

Not necessarily government debt. The aim is to inject money into the system, and they want to get the most effective way of doing that. For instance buying corporate bonds has been touted as a way of letting companies borrow more, by removing some of their existing debt from the banks.

Neb