Posted on 11/01/2022 10:28:17 AM PDT by Oldeconomybuyer
The Bank of England has begun its sell-off of government debt: a process called QE that resulted in a flood of money going into capital markets so that asset prices carried on heading up after the financial crisis.
This is the end of an era - and the beginning of another. It is one of the most important watershed moments in recent economic history - not that you'd necessarily have noticed it.
For this afternoon is when the era of quantitative easing (QE) gives way to the era of quantitative tightening (QT).
The Bank of England, which has spent the past decade and a bit buying up government debt, in an effort, originally, to keep the economy afloat, begins the process of selling that debt.
You probably won't notice this for much the same reason as you might not have noticed the asset purchases in the first place.
QE was one of the most remarkable economic exercises in history.
The Bank ended up buying up close to a trillion pounds of government debt, all of it financed by the creation of money - in other words printing it electronically.
It represented an almighty amount of cash being showered on the UK economy, yet because it happened quietly through the government bond market, with the Bank slowly buying up large quantities of so-called gilt-edged securities, the impact was felt not with a bang but more slowly and indirectly.
(Excerpt) Read more at news.sky.com ...
quantitative easing ...... They ran out of paper and ink............
Government debt is balanced by private sector surplus since the pounds (or dollars) have to go someplace. Reversing this will drain wealth from the private sector, driving up borrowing costs and increasing the amount of debt service paid by businesses. They will need to cut costs by laying off workers thus reducing the national GDP and growth. Eventually, this leads to a recession and a lot of needless hardship on the part of working people. The resulting higher interest rates will make buying homes and cars much more expensive for those who live on a paycheck.
The real beneficiaries of QT are the older, wealthier folks who have savings and can earn higher incomes from the high interest rates on their government bonds.
“Reversing this will drain wealth from the private sector...”
That “wealth” was simply printed money with no increased productivity to back it. So there was no actual increase in real wealth, just the usual currency debasement under another name.
This explains quantitative easing...
Best summary of our economic crisis I ever heard.
https://twitter.com/silverguru22/status/1585817249545609216
I just watched your link. That man is impressive!
And accurate and honest. It applies here in the USA too.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.