Re: Quantitative easing - where will the funds be injected?


<v.meldrew@xxxxxxxxxxxxxxxxxxx> wrote in message
news:62h4q41ncfh6hlr8cjrlt7tfbo4meq78v8@xxxxxxxxxx
On Sun, 22 Feb 2009 14:13:33 -0800 (PST), James Harris
<james.harris.1@xxxxxxxxxxxxxx> wrote:

On 22 Feb, 12:04, v.meld...@xxxxxxxxxxxxxxxxxxx wrote:
On Fri, 20 Feb 2009 07:43:58 -0000, "nebulous" <p...@xxxxxxxx> wrote:



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.

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


.

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