Extract from Bank of England Letter, 14th December 2011:
When asked what safeguards there were to ensure that money released through ‘QE’ was used solely for the benefit of the nation, the long winded reply amounted to ‘None’.
Once an investor received payment for the asset sold to the Bank of England, it just became a deposit in the investors bank account to be used in whatever way wished. However from within the letter the following extract makes for interesting reading:
“I think that I cannot do better than explain the mechanism behind QE. The money used for QE is created electronically as a positive balance on the accounts of the Bank of England, known as central bank money.
This money is then lent, with interest charged to the Bank of England Asset Purchase Facility Fund *(BEAPFF) in order that the BEAPFF can then buy assets from the private sector. So far the BEAPFF has principally bought British Government Stocks. This part of the national debt still exists, it is just held temporarily by the BEAPFF. (*My underlining)
When the Bank decides that QE has done its job and we need to unwind the BEAPFF’s holdings in order to meet the inflation target, these can be sold back to the market and the electronically created money will disappear as the BEAPFF pays back the loan to the Bank of England”
Your comments are invited.