Mr Redwood recently posted on the subject of Quantitative Easing:
People say the aim was merely to bring down longer term rates of interest, to make it cheaper to borrow long term. They see QE as an elaborate way of altering the price of long term money compared to short term loans. Perhaps the Bank’s first explanation that it was to try to inject cash into the economy to be spent is nearer the mark.
What is more interesting is the change of stance on unwinding the position. In the early days it seemed likely that first the Bank would stop new purchases, then allow repayments of debt to cancel the outstanding gilts as they matured, and then sell back the remainder before raising interest rates. Now the agreed policy is to raise the official short term rate before taking any steps to reduce the amount of bonds held. This has the perverse consequence of losing money on the bond holdings at market prices, if the Bank raises the official rate and that has the normal impact on the value of gilts.
If true, this adds to the rip-off of the taxpayer by the government's selling of public assets at less than the market value.
No comments:
Post a Comment