Too true. That’s why many of us are campaigning to nationalise the money system, i.e. for

legislation to prohibit banks from creating new money (as debt), and for the state to take exclusive responsibility for issuing money. The banks

should be limited to taking deposits and making loans based on those deposits (with strict liquidity ratios).

Comment By Martin on March 10th, 2009 at 7:31 pm

@Martin, I’m afraid I don’t understand your comment.

“Quantitative easing” was used in Japan as part of the Bank of Japan’s

five-year experiment, beginning in March 2001, to create growth or inflation. It failed to induce any inflation at all, as the Japanese continued

to pay down their debts.

Comment By Dr L Brownstein on March 11th, 2009 at 11:23 am

Hi Ann,
I am a bit confused.
Has or is the B of E about to print 75 billion pounds or is it going to use QE (I am still not

clear on that one) to make it look like there are 75 billion pounds more in the British economy.
I think I need to read something along the

lines of QE , Keynesian economics, derivative etc for dummies so that I can get a better handle on the discussion.

Comment By Alan Smith on March 12th, 2009 at 2:29 am

There still seems to be a misunderstanding about QE.
1) QE IS “printing money” (though it may not be “about” printing money) –

which nowadays is done through computer entries in bank’s credit acounts. The central banks buy back government bonds from holders and credit

their bank accounts with new money.
2) QE creates money out of “thin air” – as the effort required is as laborious as making keyboard entries.

Ann mentions QE as a tool to reduce interest rates to prevent insolvencies from spiralling out of control . But how is the Obama

administration going to do QE and running a record budget deficit at the same time – which requires new treasury bill issues to fund it.

It

may be the same with the UK if they go on budget deficit.

Comment By C. Rasjid on March 12th, 2009 at 10:54 pm

Where will the BoE get the £75 billion which it will use to buy back bonds, if not by “printing” (presumably electronic) money?

Comment By Robert (Jamie) Munro on March 13th, 2009 at 1:02 pm

Rasjid, you are right. QE is no more printing money, than banks issuing credit every day are ‘printing money’.

The point about the BoE taking government bonds out of the market, and on to its balance sheet, is that that will increase the price of the bonds

and lower the yield….And for a government planning to issue more bonds, that is very helpful. Because it reduces the cost to the budget

ultimately of those bonds….But more importantly, it reduces the borrowing costs of businesses going bust….if they can be kept alive, then there

is less chance of unemployment and the costs of unemployment benefits. i.e. welfare….Cutting welfare as well as borrowing costs, helps reduce the

budget deficit….hey presto. Its been done before (i.e. 1930s) and it can be done again…Its not rocket science.

Comment By Ann Pettifor on March 15th, 2009 at 2:47 pm

Robert Munro….where will the BoE get the money? Where the banks get it from every day…’our of thin air

‘….Economists are whingeing about the BoE ‘printing money’…but banks do it every day…and no, they don’t use printers…they simply punch

numbers into an electronic ledger, add a ‘price’ – the rate of interest….and then drain your bank account to get repaid. That’s the magic of

banking…and why aren’t we all bankers?

The BoE will do the same thing, but instead of draining any institution’s bank account, including

the government’s bank account, they put the assets they have purchased on their balance sheet. One day they may sell them…but for now, those

assets (bonds) are out of the market place, and helping to increase the price of government bonds.

As the price of a bond (say £1,000)

rises (to say £2,000) the fixed rate of interest on the original bond (say 3%) falls relative to the total price – ie the ‘yield’ on the bond

falls….this has an impact on the yields of all bonds, in particular corporate bonds..used by companies to raise cash….Hope this helps..

Comment By Ann Pettifor on March 15th, 2009 at 2:53 pm

Your reply to Robert Munro is as a “breath of fresh air” – not talking thin air.

Ann’s reply to Rasjid: I can’t (yet) fault

your answer as it seems logical. Being too long exposed to Antal E. Fekete, part of my mind just think that… debt is evil…and wouldn’t accept

any proposition involving issuing massive new debts/evil to attack “The Destruction” from destructions of old debts/evil.

Hopefully the

running BoE people have PhD Economics and know that “Dynamics of Perpetual Motion” has been discredited – Rasjid.

Comment By C. Rasjid on March 15th, 2009 at 8:53 pm

I’ve never given this a try, but I think it’s about time I do.

Comment By Protetion on March 18th, 2009 at 8:45 pm

Thoughtful post and well written. Please write more on this

if you have time.

Comment By Becky on July 3rd, 2009 at 8:37 pm