How to waste £445 billion? – The Failure of Quantitative Easing

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In the years following the financial crisis, the UK wasted £445bn on a failed scheme to stimulate the economy and end the recession. This was one of the biggest missed opportunities in history. Here’s how it happened and what would happen if the Bank of England had taken just a small fraction of the money they’d created, and put it into the real economy instead…

(Note: It was increased from £375 billion since the video was made to £445 billion.)

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I’ve just watched this video which explains why the government was cancelling school rebuilding programs and flood defence programs because they’d ‘run out of money’, even though the Bank of England was creating £375bn to pump up the financial markets. I think you’ll find it shocking:

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  • Tom Bayley

    I heard the sadness of the music, and what it evoked for me was the lunacy of the diatribe I heard over it. Something very big is being missed here.

    QE involved buying £375bn of government debt, and yet the government has borrowed twice that amount since QE started. Would all that borrowing have been possible without QE? For a clue, take a look at Greece maybe, where the opportunity for QE was not available. There we see what happens to public finances when the money simply isn’t there, either to be taxed or borrowed or ‘created’ by QE.

    Here’s a little parable. Imagine a low-lying country where everybody lives by the sea, and all have to suffer occasional flooding. They all clamour for flood defences, but for some reason building walls against the sea is regarded as reckless folly. The only thing allowed is for ditches to be dug to take the water away. One day a tsunami appears on the horizon. The government realises they really have to build a wall now, despite the fact they are not allowed to. So they set to building absolutely massive ditches, and tell everyone that’s what they’re doing, all the while ensuring that the diggings pile up to form a barrier. The tsunami hits. The barrier mostly does it’s job but is not high enough. A little water goes over the top and many homes are knee deep in it.

    There is a public outcry. Everyone understands now that building a wall was the right thing to do, so why the hell was the government so stupid as to dig a ditch?

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