Quantitative Easing
The Briefing Room
BBC
4.8 • 731 Ratings
🗓️ 29 September 2016
⏱️ 27 minutes
🧾️ Download transcript
Summary
As part of its response to the Brexit vote, the Bank of England will buy an extra £70 billion of bonds and will create new money to do so. The aim is to stimulate the economy and try to meet the government's 2% inflation target. But will it work?
The Bank of England began its programme of quantitative easing back in 2009 following the financial crisis. It began buying bonds, mostly government debt, from pension funds and other investors
Before this latest round of QE was announced, the Bank already owned £375 billion of bonds, around a quarter of total outstanding government debt. Its supporters say it has brought down borrowing costs for the government and for other investors and has helped to push up prices. Its detractors say it has caused hardship for savers and has led to pension funds having to compete with the Bank of England for increasingly expensive bonds, which has seen their deficits balloon.
In this episode, David Aaronovitch explores how QE works and examines the evidence of its impact so far. Was the Bank of England right to return to the policy following the EU referendum? Will it ever be unwound?
Guests:
Frances Coppola, financial blogger Stephen Jones, Chief Investment Officer, Kames Capital Toby Nangle, Fund manager, Columbia Threadneedle
Producer: Phil Kemp.
Transcript
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| 0:00.0 | For a seven-minute video on obscure economic policy to go viral, it was very surprising. |
| 0:12.0 | So why do they call it the quantitative easing? Why don't they just call it the printing money? |
| 0:18.0 | Because the printing money is the last refuge of failed economic empires in banana |
| 0:22.5 | republics, and the Fed doesn't want to admit this is their only idea. |
| 0:27.0 | As a trader on Wall Street, back in November 2010, Omid Malekhan found himself being asked by |
| 0:33.2 | a lot of friends if he could explain for them what quantitative easing was. |
| 0:38.5 | The irreverent video he made to help them has been viewed millions of times, possibly because |
| 0:44.2 | it's not a concept many others were trying to describe, but mostly because it was very funny. |
| 0:48.6 | So what is deflating right now? The only thing deflating that I can see is the Fed's credibility. |
| 0:55.0 | I was shocked by how popular it became because normally in video circles, what they tell |
| 1:01.0 | you is if a video is going to go viral, then it should be very short and about cats. |
| 1:07.0 | The Ben Burnink has no business experience. |
| 1:10.0 | Does the Ben Burnack have a lot of policy experience? |
| 1:13.6 | No, the Ben Burnink has no policy experience. So what qualifies him to run the Fed? I don't know, |
| 1:20.1 | maybe the fact that he has a nice beard. But it wasn't just the American Central Bank, the Federal Reserve, |
| 1:26.5 | that adopted the policy of QE. |
| 1:29.1 | So far, the Bank of England has spent £375 billion buying up government bonds, |
| 1:35.9 | and it's just announced a further £70 billion in bond purchases as part of its response to the vote for Brexit. |
| 1:43.7 | One arm of the state is buying up the debt of another. |
| 1:47.6 | Is this an episode of the Twilight Zone? |
| 1:49.9 | I don't think so. |
| 1:51.1 | Are you sure? |
... |
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