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[sherbetsaucers]

Now I've said many times I don't know that much about 'finance'. It confuses me. Lots. But back in 2009 the Bank of England started quantitive easing. (Printing more money) The theory being it would spark growth in the economy. We would have infrastructure projects with happy workers earning an honest wage. What happened was the banks got the money

Comments

[borusa]

One thing that you've missed is that the Bank of England didn't just hand out the cash like they were a broken ATM. What they did, essentially, is swap one form of government debt (cash) for another (gilt-edged bonds, T-Bills etc). Simply "giving out money" is highly inflationary, to the extent of being pointless and damaging(1). Quantitive easing is inflationary too, but less so (2)

The idea is to increase the money supply. You're right, in that a large amount of it got sucked into banks, increasing the amount of cash they held (as they were asked to do). That's probably a good thing on balance, but it perhaps wasn't the exactly intended good thing.

It is difficult to tell what would have happened if QE hadn't been used, because economic models are not brilliant. It is likely that inflation would be lower, possibly a lot lower.

(1) Think of it this way - if you have ten pounds, and are willing to spend it to buy dinner, the sudden appearance of another ten pound note in your pocket just means that you're willing to pay 20 pounds for dinner, not 10.
(2) And whether it is pointless and damaging, or effective, or neither is a subject of some debate.

[sherbetsaucers]

Thanks, that helps a bit actually.