Quantitative easing

[NickInTheNorth]

now as you will all doubtless agree I am a simple minded soul.

So can someone please explain to me the benefit of "quantitative easing". The way I understand it to work is that the bank of england gives a sizeable chunk of non-existant cash to "financial institutions"; in return those institutions give "assets" to the BOE. Those institutions then apparently use the money to buy shares, make loans, and generally spend the dosh to help to create jobs and generally stimulate the economy.

Why would it not be a better idea for the BOE to magically create the same amount of cash, give it to the government, and let the government spend £75 Billion on new infrastructure projects?

[John Little]

It would be a far far better idea- you are right.

[charlie]

'Tis financial jiggerry pokery Nick in the North.

It is a way to have money sloshing around in the economy to supposedly stimulate somebody to spend it (not you or me obviously).

I believe the "assets" are actually UK government bonds.
Ther are bought from the banks (who already bought them directly from the government) and not "directly" from the government.

EU member states are not allowed to finance their public spending (deficit) by actually printing money (The the Maastricht Treaty).
This method ensures the government doesn't actually get its hands on that cash to do what you actually suggest they should.

Well that's the theory :)

[sandyr1]

If you want to see how the 'World Works' read Decision Points by George W. Bush.
Just finished it and it is written in rather simple terms, and does explain how the World Works, including the way the TARP (Toxic Asset etc) worked in the United States.

[scotsboy]

Tis the reason why the pound:euro exchange is dire with the Euro in turmoil! Basically the pound has been and will be further devalued:-(

[sandyr1]

It seems the UK is at the money Printing presses 'big time'!