MegaSack DRAW - This year's winner is user - rgwb
We will be in touch
What's the point of the Bank of England pumping billions into the economy (through quantitative easing) whilst the Government is trying to take billions out of it (in public spending cuts)?
My limited understanding is that the quantative easing with Govt bonds etc is not 'real' money just Govt backed and doesn't show up on the balance sheet in the same way and is supposed to help with liquidity and the flow or velocity of money in order to try and stop the economy grinding to a halt.
The public spending cuts and tax rises are attempting to address the real money issues of the public sector budget defecit. We have been spending more than we have been bringing in and are building up real debt. A tough thing to attempt when an economy is slowing down.
In an ideal world you would put something by when the going is good to give yourself some breathing space and room for manoeuvre when it inevitably slows up. Something that the short termism of a democratic political system seems incapable of delivering.
I do not have the answers and I am sure that others will be along soon to say how wrong I am. When I studied this (many years ago) I was told that if economies were self balancing then economists could go off and write poetry. This seems like the start of a long and painful process with the rebalancing of the world economy - West to East (well BRIC at least) 🙁
3 things I can see.
Money needs to be in the right place. We are suffering from a lack of credit so QE is an attempt to make people with money more willing to lend by offering security. This money wouldn't make it to the right places if we just didn't cut
We spend more money than we raise in taxes. The cuts are an attempt to reduce the deficit so we no longer have to borrow money to remain at or current standards.
And finally the most likely is that the people making the decisions don't talk to each other and haven't got a clue. Hopefully the Canadians will see us right?
the more you look into the relationship between the bank of england and the government the more you will question whether we are actually livestock on a giant human farm. best to ignore it all if you ask me
It's all just a good way of keeping the rich happy and making sure they are well fed.