“The EU financial sector does not need to be eased, there is plenty of liquidity in the banks. Quantitative easing, as practised by the Bank of England and the US Federal Reserve, merely flooded the financial sector with money to the benefit of bondholders. This did not create a so-called wealth affect, with a trickle-down to the real producing economy.”,writes our supporter from the Devon local group, Tony Pugh, in a letter in the Guardian, 25th Jan 2015 as a response to last week’s announcement of quantitative easing programme by the European Central Bank’s president, Mario Draghi:
This was supposedly the result that the Bank of England wanted, ie to stimulate the real economy; but, as your leader pointed out, it was just fixed assets and properties that benefited. This is yet another factor in the increasing level of income inequality that is now prevalent in the UK and US, and does little to promote growth and increase GDP.
If the EU were bold enough, it could fund infrastructure or renewables projects directly through the electronic creation of money, without having to borrow. Our government has that authority, but lacks the political will. The CBI has calculated that every £1 of such expenditure would increase GDP by £2.80 through the money multiplier. The Bank of England’s QE programme of £375bn was a wasted opportunity.